SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported) February 15, 2000 (February 7, 2000)
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AIRPORT SYSTEMS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
KANSAS 0-22760 48-1099142
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
11300 West 89th Street, Overland Park, Kansas 66214
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (913)-495-2614
area code
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 7, 2000, Airport Systems International, Inc., a Kansas
corporation ("ASII"), acquired all of the issued and outstanding shares of
common stock, $1.00 par value per share, and certain intangible assets
relating to DCI, Inc., a Kansas corporation ("DCI"), from its stockholders,
Chris I. Hammond, Larry C. Klusman and William D. Cook (the "Sellers"). DCI
is an electrical contract manufacturing company. ASII intends to continue
the operations of DCI.
ASII paid $1,234,000 in cash, issued 150,000 shares of its common stock
and delivered a four-year promissory note in the amount of $1,248,000 in
consideration for the common stock and intangible assets acquired from Sellers.
The total consideration for the acquisition from the Sellers was $2,819,500,
plus the assumption of certain debt owed by DCI.
Immediately following the acquisition of the common stock and intangible
assets of DCI, DCI acquired certain assets of KHC of Lenexa, L.L.C., a Kansas
limited liability company ("KHC"). KHC was owned by the Sellers and had a
leasehold interest in certain real property that was the subject of City of
Lenexa, Kansas Variable Rate Demand Industrial Development Revenue Bonds (DCI
Project) Series 1998 totaling $2,570,000 and other related documents (the "IRB
Documents"). DCI paid $1,290,000 in cash as consideration for the assets
acquired from KHC. DCI also assumed certain liabilities and obligations related
to the IRB Documents.
The asset and stock acquisitions were financed through a Loan and Security
Agreement entered into by and among ASII, DCI and Bank of America, N.A. ("BOA")
as of February 7, 2000, providing, among other things, a revolving loan in the
amount of $8,000,000, term loans from BOA in the amount of $1,178,000 and an
irrevocable direct-pay letter of credit facility in the amount of $2,599,572.60.
On February 7, 2000, ASII also entered into a financing arrangement with
KCEP Ventures II, L.P., a Kansas limited partnership ("KCEP"). In connection
with this arrangement, ASII sold and issued to KCEP 198,413 shares of ASII
common stock for $500,000 ($2.52 per share), a convertible subordinated
debenture in an amount of $500,000 with a conversion price of $3.00 per share,
and a warrant granting KCEP the right to purchase 45,635 shares of ASII common
stock for $150,595.50 ($3.30 per share). ASII plans to use the proceeds from the
sale of the securities for general working capital purposes and to fund
potential future acquisitions in the electrical contract manufacturing business.
The Stock Purchase Agreement with Sellers, the Asset Purchase Agreement
with KHC, the Investment Agreement with KCEP, the Loan and Security Agreement
with BOA and the press release issued by ASII in connection with the acquisition
and financing are filed as exhibits to this report and are incorporated herein
by reference. The description of the acquisition and financing set forth herein
does not purport to be complete and is qualified by the provisions of the
agreements noted above and attached hereto.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS. Financial statements and pro forma
financial information will be filed by amendment within the required
reporting period.
(c) EXHIBIT. The following exhibits are filed herewith:
10.1 Asset Purchase Agreement, dated as of January 10, 2000, by
and among Airport Systems International, Inc., KHC of
Lenexa, L.L.C., Chris I. Hammond, Larry C. Klusman and
William D. Cook.
10.2 Stock Purchase Agreement, dated as of January 10, 2000, by
and among Airport Systems International, Inc., DCI, Inc.,
Chris I. Hammond, Larry C. Klusman and William D. Cook.
10.3 Investment Agreement, dated February 7, 2000, by and
between KCEP Ventures II, L.P. and Airport Systems
International, Inc.
10.4 Loan and Security Agreement, dated February 7, 2000, by and
among Airport Systems International, Inc., DCI, Inc. and
Bank of America, N.A.
10.5 Registration Rights Agreement, dated February 7, 2000, by and
among Airport Systems International, Inc., Chris I. Hammond,
Larry C. Klusman and William D. Cook.
10.6 Investor's Rights Agreement, dated February 7, 2000, by and
among Airport Systems International, Inc. and KCEP
Ventures II, L.P.
10.7 10% Convertible Subordinated Debenture, due February 7, 2005,
dated February 7, 2000.
10.8 Warrant
10.9 Letter of Credit, Loan and Security Agreement, dated
February 7, 2000, by and among Airport Systems International,
Inc., DCI, Inc. and Bank of America, N.A.
99.1 Press Release dated February 8, 2000.
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SIGNATURE
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 hereunto duly authorized.
Date: February 15, 2000
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:/s/ Thomas C. Cargin
Thomas C. Cargin, Vice President
of Finance and Administration,
Secretary and Principal
Accounting Officer
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of January 10, 2000, by and between DCI, Inc., a Kansas corporation (the
"Buyer"), KHC of Lenexa, L.L.C., a Kansas limited liability company (the
"Seller"), Chris I. Hammond, William D. Cook and Larry C. Klusman (collectively,
the "Members").
RECITALS
WHEREAS, pursuant to that certain Stock Purchase Agreement (the "Stock
Purchase Agreement") dated January 10, 2000, entered into by and among Buyer,
Airport Systems International, Inc. ("ASII"), Chris I. Hammond, William D. Cook
and Larry C. Klusman, ASII purchased all of the issued and outstanding stock of
Buyer and Buyer became a wholly-owned subsidiary of ASII.
WHEREAS, the Members own all of the membership interests in the Seller.
WHEREAS, the Seller has a leasehold interest in that certain real estate
(together with all improvements appurtenant thereto) located at 15301 West 109th
Street, Lenexa, Kansas (the "Real Property") that is used by Buyer in the
operation of its business.
WHEREAS, the Seller wishes to sell, transfer, assign, convey and deliver
its interest in the Real Property and certain other assets of Seller to Buyer,
and Buyer wishes to purchase, acquire and accept the interest of Seller in the
Real Property and the other assets in exchange for the consideration and the
assumption of certain of the Seller's liabilities as set forth below, subject to
the terms and conditions set forth in this Agreement from the Seller.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. PURCHASE OF THE REAL PROPERTY; PURCHASE PRICE; CLOSING
1.1. PURCHASE OF INTEREST IN THE REAL PROPERTY. On the terms and subject to
the conditions set forth in this Agreement, on the Closing Date (as defined in
Section 1.4 below) the Seller agrees to sell, transfer, assign, convey and
deliver to the Buyer, and the Buyer agrees to purchase, acquire and accept from
the Seller, free and clear of all liens and encumbrances other than those
expressly permitted, all of Seller's right, title and interest in all of the
assets, tangible and intangible, owned or leased by Seller, including without
limitation, the following properties, assets, rights and interests (collectively
referred to as the "Assets"):
(a) the Real Property and all structures, fixtures and other
improvements located thereon or that are actually or constructively
attached thereto, and all modifications, additions, restorations or
replacements of the whole or any part thereof (the "Improvements"); and
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(b) cash and any securities associated with the $2,570,000 City of
Lenexa, Kansas Variable Rate Demand Industrial Development Revenue Bonds
(DCI Project) Series 1998 (the "IRBs") and held pursuant to the Trust
Indenture between the City of Lenexa, Kansas and UMB Bank, N.A. as Trustee,
the Lease between the City of Lenexa, Kansas and KHC of Lenexa, L.L.C. (the
"Lease"), the Sublease between KHC of Lenexa, L.L.C. and DCI, Inc. (the
"Sublease"), the Guaranty Agreement between DCI, Inc. and UMB Bank, N.A.,
the Placement Agreement by and among the City of Lenexa, Kansas,
NationsBank, N.A., KHC of Lenexa, L.L.C., and DCI, Inc., the Letter of
Credit and Reimbursement Agreement by and among KHC of Lenexa, L.L.C., DCI,
Inc. and NationsBank, N.A. (the "Reimbursement Agreement"), the Remarketing
and Interest Services Agreement by and among KHC of Lenexa, L.L.C., DCI,
Inc., the City of Lenexa, Kansas and NationsBank, N.A., the Continuing and
Unconditional Guaranty by and among NationsBank, N.A. (as the Guaranteed
Party), KHC of Lenexa, L.L.C. and DCI, Inc. (as Borrowers) and Chris I. and
Kathryn D. Hammond, William D. and Nancy M. Cook, and Larry C. and Mary E.
Klusman (as Guarantors), the Warranty Deed between KHC of Lenexa, L.L.C.
and the City of Lenexa, Kansas, the Memorandum of Lease between the City of
Lenexa, Kansas and KHC of Lenexa, L.L.C., the Assignment of Lease between
the City of Lenexa, Kansas and KHC of Lenexa, L.L.C., the Leasehold
Mortgage and Security Agreement between KHC of Lenexa, L.L.C. and
NationsBank, N.A. (the "Leasehold Mortgage"), and the Tenant Estoppel
executed by DCI, Inc., each dated as of September 1, 1998 (collectively,
the "IRB Documents"); and
(c) any equipment or other personal property purchased by Seller with
the proceeds of the IRBs, all to be delivered to Buyer at the Closing (as
defined below).
1.2. ASSUMPTION OF LIABILITIES.
(a) Except as described in paragraph (b) below, Buyer shall assume no
liabilities, obligations, commitments, fixed or contingent of Seller. The
Seller shall remain unconditionally liable for all obligations, liabilities
and commitments of the Seller other than the IRB Obligations (as defined
below).
(b) Buyer shall assume those certain liabilities and obligations
related to the IRB that are set forth in the IRB Documents and related to
the period on and after the Closing Date (the "IRB Obligations") pursuant
to documents mutually acceptable to Buyer and Seller, which shall include a
complete release of all of the Members from any guarantees or other
obligations related to the IRB Obligations.
1.3. PURCHASE PRICE. The consideration to be paid for the Assets shall be
$1,290,000 (the "Purchase Price"). Buyer shall pay to the Seller such amount on
the Closing Date by wire transfer to an account designated by the Seller.
1.4. CLOSING. The Closing shall take place at the offices of Blackwell
Sanders Peper Martin LLP, 2300 Main Street, Suite 1100, Kansas City, Missouri
64108 at 10:00 a.m., central time, on February 4, 2000, or at such other place,
time or date as may be mutually agreed upon in writing by the parties (such date
and time being referred to herein as the "Closing Date").
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1.5. ALLOCATION OF PURCHASE PRICE AND IRB OBLIGATIONS. The aggregate amount
of the Purchase Price and the IRB Obligations shall be allocated among the
Assets in a manner mutually acceptable to the parties and as set forth on
SCHEDULE 1.5 attached hereto.
1.6. TRANSFER. Buyer shall be entitled to immediate possession of, and to
exercise all rights arising under, the Assets from and after the Closing Date.
Except as provided hereby, all profits, losses, liabilities, claims or injuries
arising before such transfer shall be solely to the benefit or the risk of
Seller. All such matters arising after transfer shall be solely for the benefit
or risk of the Buyer. The risk of loss or damage by fire, storm, flood, theft or
other casualty or cause shall be in all respects upon Seller prior to such
transfer and upon the Buyer thereafter.
1.7. PRORATION OF TAXES. Seller will pay all taxes, general and special,
and all special assessments against the Real Property and the Assets that are
due and have accrued as of the Closing Date, and Buyer will assume all of such
taxes and assessments, and installments of unpaid special assessments becoming
due and accruing thereafter, except that all general real estate taxes and
installments of special assessments (exclusive of rebates and penalties)
becoming due and accruing in the current year will be pro-rated, on the basis of
the current tax year, as of the Closing Date. If the amount of current general
real estate taxes and installments of special assessments is not then
ascertainable, the adjustment thereof will be on the basis of the amount of the
most recent ascertainable assessments and tax rates.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
2.1. CAPACITY OF THE SELLER. Seller is a limited liability company duly
organized and duly qualified to do business and in good standing under the laws
of Kansas. The Seller has all requisite power and authority to own, lease and
otherwise to hold and operate the Assets, to carry its business as now conducted
and to enter into this Agreement, the agreements and instruments referred to
herein and the transactions contemplated hereby.
2.2. AUTHORIZATION. The execution and delivery of this Agreement by the
Seller, and the agreements provided for herein, and the consummation by the
Seller of all transactions contemplated hereby, have been duly authorized by all
requisite action. This Agreement and all such other agreements and obligations
entered into and undertaken in connection with the transactions contemplated
hereby to which the Seller is a party constitute the valid and legally binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms subject to applicable bankruptcy, insolvency or other
similar laws relating to or affecting the enforcement of creditors' rights
generally and to general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
2.3. CONSENTS. To the best of Seller's knowledge, SCHEDULE 2.3 attached
hereto sets forth a true, correct and complete list of all consents and
approvals of third parties that are required in connection with the consummation
by the Seller of the transactions contemplated by this Agreement. Except for any
such consents or approvals or any consent, action or filing required solely
because of the Buyer's participation in the transactions contemplated hereby,
the execution, delivery and performance of this Agreement by the Seller does not
require any
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consent from, action by or in respect of, or filing with, any court, arbitrator
or any local, state, federal or foreign governmental or regulatory authority,
body or agency or the staff thereof (collectively, "Governmental Authority").
2.4. NO CONFLICT. Neither the execution and delivery of this Agreement nor
the performance by the Seller of the transactions contemplated herein will (i)
violate the provisions of the Articles of Organization or the Operating
Agreement of the Seller; (ii) violate or constitute a default, or require notice
and/or consent, under any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument required to be set forth to which the
Seller is a party, or any order, judgment or ruling of any court, arbitrator or
Governmental Authority under which any property of the Seller is bound; (iii)
result in the creation of any lien, pledge, mortgage, security interest, lease,
charge, option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement, or any encumbrance
(collectively, "Liens") upon the Assets; or (iv) violate any provision of any
foreign, federal, state and local laws, statutes, rules, regulations, codes,
ordinances, plans, orders, judicial decrees, writs, injunctions, notices,
decisions or demand letters issued, entered or promulgated pursuant to any
foreign, federal, state or local law (collectively, "Laws") applicable to
Seller, or the Assets.
2.5. LITIGATION. The Seller is not a party and none of the Assets are
subject to any litigation, suit, action, investigation or proceeding pending or
threatened before any court, Governmental Authority or arbitrator relating to or
affecting the Assets or the business or condition (financial or otherwise) of
the Seller nor, to the best of Seller's knowledge, is there any investigation
relating thereto. There is no lawsuit or legal, administrative or regulatory
proceeding or investigation pending or threatened against the Seller challenging
the legality of this Agreement or the transactions contemplated hereby. The
Seller is not in violation of or in default with respect to any judgment, order,
with injunction or decree of any court, administrative agency or Governmental
Authority.
2.6. BROKER'S OR FINDER'S FEES. The Seller has not authorized any person to
act as a broker, a finder or in any similar capacity in connection with the
transactions contemplated by this Agreement.
2.7. ASSETS. Except for the Real Property, which is leased by Seller
pursuant to the IRB Documents, Seller is the sole and exclusive legal and
equitable owner of, and has good and marketable title to the Assets free and
clear of any encumbrance. To the best knowledge of Seller, the Real Property and
the Improvements are in good condition and repair, are free from material
defect, are adequate and sufficient for use as the principal place of business
for the business operations currently conducted by Buyer, and are in compliance
with applicable Laws and industry standards. No portion of the Real Property or
the Improvements are the subject of, or affected by, any condemnation or eminent
domain proceedings currently instituted or pending and so far as Seller
reasonably knows, no such proceedings are threatened. To the best knowledge of
Seller, the electrical, plumbing, heating and air conditioning, mechanical, and
other systems in the Improvements are in good condition and working order and
are adequate in quantity and quality for all requirements of the Improvements.
All Improvements to the Real Property lie entirely within the boundaries of the
Real Property, and no structure of any kind encroaches the Real Property. The
Seller represents and warrants that:
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(i) to the best knowledge of Seller, the Real Property and the
Improvements have direct and unobstructed access (A) to all utilities
necessary for the uses to which the Real Property and the Improvements
are presently devoted by Seller through easements or rights of way,
and (B) to a public street for vehicular and pedestrian access;
(ii) the Real Property and the Improvements are not subject to
any covenant or other restriction preventing or limiting Seller's
right to convey its right, title, and interest therein (including the
leasing thereof to Buyer or the assignment of leases pertaining
thereto), other than the covenants or restrictions set forth in the
Lease;
(iii) the Assets other than the Real Property are not subject to
any covenant or other restriction preventing or limiting Seller's
right to convey its right, title, and interest therein (including the
leasing thereof to Buyer or the assignment of leases pertaining
thereto), other than such covenants or restrictions set forth in the
Reimbursement Agreement, the Leasehold Mortgage, and the Lease;
(iv) the Assets are not subject to any covenant or other
restriction preventing or limiting Seller's right to use such Real
Property and/or the Improvements for the various purposes for which
they are currently being used;
(v) to the Seller's knowledge, there are no special assessments,
fees or charges (including any "impact fees" or charges in the nature
thereof) of any kind or nature whatsoever levied or assessed or
pending or contemplated against the Assets by any Governmental
Authority having jurisdiction of the Assets;
(vi) Seller is not a "foreign corporation," "foreign partnership"
or "foreign estate" as those terms are defined in the Internal Revenue
Code of 1986, as amended, and that Seller will furnish to Buyer such
further assurances with respect to this representation and warranty as
Buyer shall reasonably request;
(vii) Other than the Lease, Seller has no interest as lessor or
lessee in leases of or for all or any portion of the Real Property or
the Improvements;
(viii) it has received no written notice that the Real Property
and the Improvements are not in conformance in all material respects
with all zoning and other laws and codes; and
(ix) with respect to the Real Property, there are no (i)
materialman's, mechanic's, carriers', workers', repairmen's and other
similar liens or (ii) statutory liens.
2.8. UTILITIES. The Real Property and the Improvements are serviced by
adequate sewer, electric, communications, and water systems and all other
utilities, and such services shall exist at Closing. Seller has no knowledge of
and has not received any notice of curtailment of any utility service supplied
to the Real Property or the Improvements.
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2.9. FINANCIAL STATEMENTS. The Seller has previously delivered to the Buyer
its unaudited balance sheet as of December 31, 1998 (the "Historical Balance
Sheet"). The Seller will also use its best efforts to deliver to the Buyer prior
to the Closing, an audited balance sheet (combined with the audited information
of DCI, Inc.) as of September 30, 1999 (the "Current Balance Sheet") and the
related statements of income, retained earnings and changes in financial
condition for the three-month period thus ended (the "Current Financial
Statements"). The Historical Balance Sheet and the Current Financial Statements
to be delivered pursuant to Section 2.9 hereof have been or will be prepared in
accordance with generally accepted accounting principles, consistently applied.
No material change in the financial condition of the Seller has taken place
since the date of the Current Balance Sheet.
2.10. COMPLIANCE WITH AGREEMENTS AND LAWS. To the best of Seller's
knowledge, the Seller has all requisite licenses, permits and certificates,
including construction, engineering, environmental, health and safety permits,
from federal, state and local authorities necessary to own and operate the
Assets (collectively, the "Licenses"). The Licenses are valid and in full force
and, to the best of Seller's knowledge, the business of the Seller does not
violate and has not violated, and Seller is not currently in violation of, in
any material respect, any federal, state, local or foreign laws, regulations,
ordinances, or orders including, but not limited to, any of the foregoing
relating to employment discrimination, occupational safety, building, health,
fire, zoning, conservation or corrupt practices, the enforcement of which would
have a material and adverse effect on the results of operations, condition
(financial or otherwise), assets, properties, business or prospects of the
Seller. The Seller has not received any notice or communication from any
federal, state or local governmental or regulatory authority or otherwise of any
such violation or noncompliance. SCHEDULE 2.10 attached hereto sets forth a
true, correct and complete list of all such Licenses, copies of which have
previously been delivered by the Seller to the Buyer.
2.11. LEASES. SCHEDULE 2.11 attached hereto sets forth a true, correct and
complete list as of the date hereof of all leases, other than the Lease, to
which the Seller is a party. True, correct and complete copies of the leases,
and all amendments, modifications and supplemental agreements thereto, have
previously been delivered by the Seller to the Buyer.
2.12. ENVIRONMENTAL.
(a) For purposes of this Section:
(i) "Hazardous Materials" means any hazardous, infectious or
toxic substance, chemical, pollutant, contaminant, emission or waste
which is regulated by any local, state, federal or foreign authority.
Hazardous Materials include, without limitation, anything which is:
(i) defined as a "pollutant" pursuant to 33 U.S.C. Section 1362(6);
(ii) defined as a "hazardous waste" pursuant to 42 U.S.C. Section
6921; (iii) defined as a "regulated substance" pursuant to 42 U.S.C.
Section 6991; (iv) defined as a "hazardous substance" pursuant to 42
U.S.C. Section 9601(14); (v) defined as a "pollutant or contaminant"
pursuant to 42 U.S.C. Section 9601(33); (vi) petroleum; (vii)
asbestos; and (viii) polychlorinated biphenyl.
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(ii) "Environmental Laws and Regulations" means all limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Laws relating
to pollution, nuisance, health, safety or the environment including,
without limitation, (i) the Federal Clean Air Act, 42 U.S.C. Sections
7401 ET SEQ.; (ii) the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sections 9601 ET SEQ.;
(iii) the Federal Emergency Planning and Community Right-to-Know Act,
42 U.S.C. Sections 1101 ET SEQ.; (iv) the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 ET SEQ.; (v) the
Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ.;
(vi) the Solid Waste Disposal Act, 42 U.S.C. Sections 6901 ET SEQ.;
(vii) the Toxic Substances Control Act, 15 U.S.C. Sections 2601 ET
seq.; (viii) Laws relating in whole or part to emissions, discharges,
releases, or threatened releases of any Hazardous Material; and (ix)
Laws relating in whole or part to the manufacture, processing,
distribution, use, coverage, disposal, transportation, storage or
handling of any Hazardous Material.
(b) To the best knowledge of Seller, the operations and activities of
Seller and any tenant of the Real Property, including maintenance of the
Real Property and the Improvements, have complied, and until the Closing
Date will comply, in all respects, with all Environmental Laws and
Regulations.
(c) To the best knowledge of Seller, there is no civil, criminal,
administrative or other action, suit, demand, claim, hearing, notice of
violation, proceeding, investigation, notice or demand pending, received,
or threatened against the Seller relating in any way to any Environmental
Laws and Regulations.
(d) The Seller has not received notice or indication from any
Governmental Authority or private or public entity advising it that it is
or may be responsible for any investigation or response costs with respect
to a release, threatened release or cleanup of chemicals or materials
produced by or resulting from any business, commercial or industrial
activities, operations or processes, including, without limitation, any
Hazardous Materials.
(e) No underground tanks, piping or subsurface structures of any type
exist or have existed on the Real Property.
2.13. ABSENCE OF UNDISCLOSED LIABILITIES. Seller has advised Buyer in
writing of any material liability against Seller and relating to the Assets,
including any contingent liability, of which it has knowledge and that is not
reflected in the Current Financial Statements. For purposes of this Section
2.13, "material" means any liability for an amount in excess of $25,000.
SCHEDULE 2.13 sets forth a list of such liabilities.
2.14. REPORTS AND RECORDS. To the best knowledge of Seller, all returns,
reports and statements relating to the Assets currently required to be filed by
Seller with any Governmental Authority have been filed and are true, correct and
complete in all material respects. All such reports, returns and statements
shall continue to be filed on a current basis until the Closing Date,
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and will be true, correct, and complete in all material respects. All logs and
business records of every type and nature relating to the Assets, have been
maintained in all material respects as required by applicable laws, rules and
regulations.
2.15. TAXES. The Seller has timely filed or will file all income tax
returns and all real and personal property tax returns required to have been or
to be filed, and the Seller has paid all taxes, assessments, penalties and
deficiencies of Seller and all amounts due any Governmental Authority to the
extent that such taxes, assessments and amounts have become due. The Seller is
current in the payment of all income, franchise, real estate, sales, use and
withholding taxes and other employee benefits, taxes or imposts. No deficiencies
have been asserted or assessed against Seller as a result of any audit by the
Internal Revenue Service or any state or local taxing authority and to the best
of Seller's knowledge no such deficiency or audit has been proposed or
threatened against Seller.
2.16. INSURANCE. SCHEDULE 2.16 includes an accurate and complete list of
all material policies of title, property, fire, casualty, liability and other
forms of insurance of any kind relating to the Assets, including policy numbers,
policy periods, policy limits, and retention or deductible amounts, and, to the
knowledge of Seller, any pending claims thereunder. All such policies: (i) are
in full force and effect; (ii) are sufficient for compliance in all material
respects by Seller with all requirements of law and of all agreements to which
Seller is a party; (iii) are valid and enforceable policies; and (iv) insure
against risks of the kind customarily insured against and in amounts customarily
carried by corporations similarly situated and provide customary insurance
coverage for the Assets.
2.17. TITLE INSURANCE. As soon as possible but no later than five (5)
business days after the date of this Agreement, Seller shall deliver to Buyer,
at Seller's expense, a standard ALTA leasehold title insurance commitment in
Buyer's name, insuring good, marketable fee simple title in the Real Property
(the "Title Commitment") from an underwriter reasonably acceptable to Buyer (the
"Title Company"). If the Title Commitment shall reflect that Seller's interest
is not good, marketable and insurable, or shows any restrictions, covenants,
easements, agreements or encroachments unrelated to the IRB Obligations and that
are not acceptable to Buyer in its reasonable discretion, Buyer shall so notify
Seller within five (5) days of receipt of the Title Commitment and legible
copies of all exception documents and the Survey (as defined below). Seller
shall, at Seller's expense, cure any defects objected to by Buyer no later than
three (3) business days prior to the Closing. If such defects are not cured,
Buyer shall have the option to (a) agree to the Closing and accept title in its
existing condition, or (b) terminate this Agreement. As of the Closing, Seller
shall cause the Title Company to issue a title insurance policy at Seller's
expense in the amount of the Purchase Price (the "Title Insurance Policy") which
is satisfactory to Buyer and reflects the absence of any encumbrance or
exception objected to by Buyer, unless waived by Buyer, and including such
endorsements as Buyer may reasonably require and for which Buyer shall be
obligated to pay.
2.18. SURVEY. Seller shall provide to Buyer all surveys in its possession
relating to the Real Property. Seller shall have the right to obtain a survey of
the Real Property, prepared according to the Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, amended 1997, ("Minimum
Standards"), meeting the accuracy requirements of an Urban Survey and containing
such other matters and certifications as are required by the Title Company to
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issue the Title Insurance Policy (the "Survey"). If the Survey discloses matters
objectionable to Buyer, Buyer will by written notice to Seller, within five (5)
days after Buyer and Buyer's counsel receive copies of the Survey, advise Seller
of Buyer's objections to the Survey. Seller may remedy, at Seller's expense, any
matters to which Buyer reasonably objects.
2.19. INDUSTRIAL REVENUE BOND DOCUMENTS. True, correct and complete copies
of the IRB Documents, including the Lease, have previously been delivered by the
Seller to the Buyer. Such documents are in full force and effect, are binding
and enforceable against the Seller in accordance with their terms and have not
been modified or amended since the date of delivery to Buyer. To the best
knowledge of Seller, there has not occurred any event which would constitute a
breach of or default in the performance of any material covenant, agreement or
condition contained in the IRB Documents, nor has there occurred any event
which, with the passage of time or giving of notice or both, would constitute
such a breach of material default.
2.20. SECURITIES MATTERS. The Members have had an opportunity to make
inquiries concerning the business affairs and financial condition of the Buyer
and ASII. The Members have been given the opportunity to ask questions of and
receive answers from the officers and directors of the Buyer and ASII concerning
the business and financial condition of the Buyer and ASII and to obtain such
additional information as the Members deem necessary. Each of the Members is
acquiring the ASII shares for investment for his own account only and not with a
view to, or for resale in connection with, any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended or other applicable securities
laws. None of the Members have any present intent of distributing or selling to
any other person any of the ASII shares.
2.21. MEMBER APPROVAL. The Members have and hereby again consent to the
disposition of the Assets as required by the provisions of Article 5, Section
3(a) of the Seller's Operating Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1. CAPACITY OF BUYER. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Kansas and has all
requisite power and authority (corporate or otherwise) to enter into and perform
the terms of this Agreement and the agreements and instruments to be executed by
Buyer hereunder and to carry out the transactions contemplated hereby.
3.2. AUTHORIZATION. The execution and delivery of this Agreement by the
Buyer, and the agreements to be executed by Buyer and/or Buyer's shareholder
hereunder and to be delivered by Buyer at Closing, and the consummation by the
Buyer of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action of Buyer (none of which actions or approval has been
modified or rescinded and all of which actions and approval are in full force
and effect). This Agreement and all such other agreements and written
obligations entered into and undertaken in connection with the transactions
contemplated hereby constitute the valid and legally binding obligations of the
Buyer, enforceable against the Buyer in accordance with their respective terms
subject to applicable bankruptcy, insolvency or other
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similar laws relating to or affecting enforcement of creditors' rights generally
and to general principles of equity. Except for those already obtained, no
consents or approvals of any third party are required in connection with the
consummation by the Buyer of the transactions contemplated by this Agreement.
3.3. NO CONFLICT. Neither the execution and delivery of this Agreement nor
the performance of the transactions contemplated herein by the Buyer will (i)
violate or conflict with any of the provisions of the organizational documents
of the Buyer; (ii) violate or constitute a default, or require notice and/or
consent, under any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument to which the Buyer is a party, or any
order, judgment or ruling of any Governmental Authority under which any of its
property is bound; (iii) require any consent, approval, filing or notice under
any provision of law, statute, rule or regulation, applicable to the Buyer; or
(iv) violate the provisions of any law, rule or regulation applicable to the
Buyer.
3.4. BROKER'S OR FINDER'S FEES. Any fees or expenses incurred by the Buyer
or any of its affiliates payable with respect to any person for acting as
broker, finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement shall be the sole responsibility of
the Buyer.
3.5. LITIGATION. There is no lawsuit or legal, administrative or regulatory
proceeding or investigation pending or, to the best knowledge of the Buyer,
threatened against the Buyer challenging the legality of this Agreement or the
transactions contemplated hereby.
3.6. CAPITALIZATION OF ASII. On the date hereof, the authorized capital
stock of ASII consists of 5,000,000 shares of Common Stock, $0.01 par value
("Common Stock"). All of the outstanding shares of capital stock of ASII have
been duly and validly issued and are fully paid and non-assessable.
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS
4.1. ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS.
(a) From the date of this Agreement until the Closing Date, the Seller
shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer free and full access upon reasonable notice
and during normal business hours to all management personnel, offices,
books and records of the Seller so that the Buyer may have full opportunity
to make such investigation as it shall desire to make of the management,
and affairs of the Seller, and the Buyer shall be permitted to make
abstracts from, or copies of, all such books and records. The Seller shall
furnish to the Buyer such information as to the Seller as the Buyer shall
reasonably request.
(b) From the date of this Agreement, Seller hereby grants to Buyer the
right to enter and inspect the Real Property and the Improvements. In order
to complete such investigation, Buyer or its designated consultant shall
have the right but not the obligation at Buyer's sole expense: (1) to
conduct tests of the soil, surface or subsurface waters, and air quality
at, in, on, beneath or about the Real Property, in a manner consistent with
good engineering practice; (2) to inspect all records, reports, permits,
applications, monitoring
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results, studies, correspondence, data and any other information or
documents relevant to Hazardous Materials or other environmental
conditions; and (3) to inspect all buildings and equipment at the Real
Property for asbestos-containing materials or other Hazardous Materials.
Buyer agrees to conduct such investigations in a manner designed to
minimize the disruption to Seller's business activities, and Seller agrees
to permit Buyer reasonable access to all portions of the Real Property and
the Improvements at reasonable times to be mutually agreed upon. Buyer
shall have the unilateral right, in its sole discretion, to terminate its
obligations under this Agreement without penalty on or before the
completion of the investigation if the investigation reveals any material
condition, contamination or pollution existing or resulting from the
operation or possession of the Real Property or the Improvements or the
conduct of any business or operations thereon that have given or are likely
to give rise to an unsatisfied on-site or off-site response, removal,
closure or remedial obligations under any of the Environmental Laws or have
had or are likely to have a material adverse effect upon Buyer's intended
use of the Real Property or the Improvements. Buyer agrees, and Buyer shall
cause its agents to agree, to keep and hold confidential any and all
reports, summaries, studies or results that are the product of such
investigations, and not to disclose such reports without the written
consent of Seller or unless required to do so by applicable law.
(c) The Seller shall authorize the release to the Buyer of all files
pertaining to the business or operations of the Seller held by any federal,
state, county or local authorities, agencies or instrumentalities. The
Seller's authorization shall specifically waive all previous claims of
privilege or other restrictions, and in any case where a release by a
present or former employee of the Seller is necessary, the Seller shall
exercise their best efforts to obtain such a release.
4.2. CONFIDENTIALITY.
(a) The existence and terms of the transaction contemplated hereby and
any information furnished by the Seller, Buyer or ASII to the other party
or parties in connection therewith ("Confidential Information") shall be
kept confidential by the receiving party and shall not be disclosed to any
third party except as set forth in subsection (b) below; provided, however,
that Confidential Information shall not include (i) information known to
the receiving party when received or (ii) information that becomes
generally available to the general public other than as a result of a
disclosure by the receiving party or parties or any of its or their
representatives in violation of this Agreement.
(b) Confidential Information may be disclosed (i) to the respective
directors, officers, employees, attorneys, accountants or financial
advisors of the receiving party or parties who need to know such
information for the purpose of consummating the transaction contemplated by
this Agreement (it being understood that such representatives of a
receiving party or parties shall be informed of the confidential nature of
such information and shall be directed to treat such information
confidentially and in accordance with this Agreement), (ii) with the
written consent of the disclosing party or parties, and (iii) as required
by law pursuant to the terms of a subpoena, order, civil
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investigative demand, or similar process issued by a court of competent
jurisdiction or by any governmental or regulatory body or agency.
(c) In the event that the transaction contemplated by this Agreement
is not consummated, each party agrees to return all physical manifestations
of the Confidential Information in its possession to the party or parties
furnishing such Confidential Information (including, to the extent
reasonably practicable, all copies, extracts, or other reproductions
thereof) and neither party or parties shall at any time thereafter,
directly or indirectly, disclose to third parties or use any Confidential
Information of the other party or parties.
4.3. PUBLIC ANNOUNCEMENTS. The parties agree that, prior to the Closing
Date, any and all general public pronouncements of this Agreement or any of the
transactions contemplated herein, shall be subject to the mutual agreement of
the Seller and the Buyer; provided, however, that the Buyer and/or ASII, without
prior consultation with the Seller, shall be entitled to file any and all public
documents and make any and all public disclosures as may be required of it under
applicable securities laws.
5. PRE-CLOSING COVENANTS OF THE SELLER AND THE COMPANY
From and after the date hereof and until the Closing Date:
5.1. CONDUCT OF BUSINESS. Except as otherwise contemplated by this
Agreement, until the Closing, the Seller shall operate the Assets only in the
ordinary course consistent with past practices, and pending the Closing, the
Seller shall use its best efforts to preserve the Assets and comply with all
terms, and discharge all of its obligations under, the IRB Documents.
5.2. ABSENCE OF MATERIAL CHANGES. Without limiting the generality of the
covenants in Section 5.1, and without the prior written consent of the Buyer,
the Seller shall not:
(a) take any action to amend its charter documents or operating
agreement;
(b) incur any obligation or liability (absolute or contingent), except
current liabilities incurred and obligations under contracts entered into
in the ordinary course of business and any of the IRB Documents;
(c) mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of the Assets;
(d) sell, assign, or transfer any of its Assets;
(e) cancel any debts or claims, except in the ordinary course of
business;
(f) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
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(g) waive any rights of material value or any of the IRB Documents;
(h) modify, amend, alter or terminate any of its executory contracts
of a material value or which are material in amount or any of the IRB
Documents;
(i) take or permit any act or omission constituting a breach or
default under any contract, indenture or agreement by which it or the
Assets are bound;
(j) fail to operate its business and maintain its books, accounts and
records in the customary manner and in the ordinary and regular course of
business, and maintain in good repair the Assets;
(k) enter into any lease, contract, agreement or understanding;
(l) incur any capital expenditure in excess of $2,500 in any instance
or $5,000 in the aggregate; or
(m) commit or agree to do any of the foregoing in the future.
5.3. COMPLIANCE WITH LAWS. The Seller will comply with all laws and
regulations applicable to it or to the conduct of its business and will perform
and comply with all contracts, commitments and obligations by which it is bound.
5.4. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES. The Seller will not
take any actions which would result in any of the representations or warranties
set forth in Sections 2 hereof being untrue.
5.5. CONTINUING OBLIGATION TO INFORM. From time to time prior to the
Closing, the Seller will deliver or cause to be delivered to the Buyer
supplemental information concerning events subsequent to the date hereof
rendering any statement, representation or warranty in this Agreement or any
information contained in any Schedule attached hereto inaccurate or incomplete
in any material respect at any time after the date hereof until the Closing
Date; PROVIDED, that none of such supplemental information shall constitute an
amendment of any statement, representation or warranty in this Agreement or any
Schedule, Exhibit or document furnished pursuant hereto.
5.6. EXCLUSIVE DEALING. The Seller will not, directly or indirectly,
through any officer, director, agent or otherwise, (a) solicit, initiate or
encourage submission of proposals or offers from any person relating to an
acquisition or purchase of all or a material portion of the assets of or an
equity interest in the Seller or any merger, consolidation or business
combination with the Seller, or (b) participate in any discussions or
negotiations regarding, or furnish to any other person, any non-public
information with respect to or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Seller agrees to promptly notify
the Buyer of any such proposal or offer, or any inquiry or contact with respect
thereto received by the Seller.
5.7. REPORTS, TAXES. The Seller will duly and timely file all reports or
returns required to be filed with federal, state, local and foreign authorities
and will promptly pay all federal,
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state, local and foreign taxes, assessments and governmental charges levied or
assessed upon them or any of its properties (unless contesting such in good
faith and adequate provision has been made therefor).
5.8. NO SECURITIES TRADING. Seller acknowledges that ASII is a publicly
held company and that either (i) the improper dissemination of information
concerning this Agreement and the transactions contemplated herein, or (ii) the
trading in ASII's stock by any party to the Agreement or by any party receiving
information concerning the Agreement or the transactions contemplated herein
from any party to this Agreement prior to the proper public release or
announcement of the Agreement could result in a violation of the Securities
Exchange Commission's insider trading regulations. Seller agrees to refrain from
disseminating such information or engaging in such trading without the prior
written consent of ASII.
6. CONDITIONS TO OBLIGATION TO CLOSE
6.1. OBLIGATIONS OF THE BUYER. The obligation of the Buyer to consummate
the transactions contemplated hereby shall be subject to the satisfaction of the
following conditions at or prior to Closing:
(a) CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of the Seller in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on and
as of such date, except for any changes consented to in writing by the
Buyer. The Seller shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions required by
this Agreement to be performed or complied with by it prior to or at the
Closing Date.
(b) GOVERNMENTAL APPROVALS. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or
approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Seller of the transactions
contemplated by this Agreement and the ownership, lease, or occupancy of
the Assets by the Buyer shall have consented to, authorized, permitted or
approved such transactions.
(c) CONSENT OF OTHER THIRD PARTIES. The Seller and the Company shall
have received all requisite consents and approvals of all third parties
whose consent or approval is required in order for the Seller to consummate
the transactions contemplated by this Agreement, including without
limitation, those set forth on SCHEDULE 2.3 attached hereto.
(d) ADVERSE PROCEEDINGS. No action or proceeding by or before any
court, administrative agency or other governmental body shall have been
instituted or threatened by any governmental body or person whatsoever
which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of the Buyer
to own the Assets or to own or operate the business of the Seller after the
Closing.
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(e) OPINION OF COUNSEL. The Buyer shall have received an opinion of
counsel to the Seller dated as of the Closing Date, in substantially the
form attached hereto as Exhibit A, and as to such other matters as may be
reasonably requested by the Buyer or its counsel.
(f) APPROVAL. The Board of Directors and the shareholder of Buyer
shall have approved this Agreement and the transactions contemplated
hereby.
(g) DUE DILIGENCE. The Buyer shall have been satisfied, in its sole
and reasonable opinion, with the results of its investigation of the
Seller. Buyer's due diligence investigation shall in no way limit Seller's
representations, warranties and agreements contained in this Agreement.
(h) TITLE INSURANCE POLICY. The Title Company shall be prepared to
issue the Title Insurance Policy, and the Title Insurance Policy shall be
satisfactory to Buyer.
(i) SURVEY. Seller shall have delivered the existing Survey to Buyer.
(j) ASSETS. At the Closing, the Buyer shall receive good, clear,
record and marketable title to the Assets other than the Real Property,
free and clear of all liens, liabilities, security interests and
encumbrances of any nature whatsoever, except as may be set forth in the
IRB Documents.
(k) IRB ASSUMPTION. The Buyer shall have received written consent and
confirmation of the Buyer's ability to assume the IRB Obligations (without
any increase therein) and to perform the transactions required by the IRB
Documents.
(l) FINANCING. Buyer and ASII shall have obtained, on terms acceptable
to Buyer and ASII in their sole discretion, financing for the transactions
contemplated herein and for the transactions contemplated by the Stock
Purchase Agreement.
6.2. OBLIGATIONS OF THE SELLER. The obligation of the Seller to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction of the following conditions at or prior to Closing:
(a) CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of the Buyer in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on and
as of such date, except for any changes consented to in writing by the
Seller. The Buyer shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions required by
this Agreement to be performed or complied with by it prior to or at the
Closing Date.
(b) CORPORATE PROCEEDINGS. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out
this Agreement shall have been taken.
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(c) GOVERNMENTAL APPROVALS. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or
approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Buyer of the transactions
contemplated by this Agreement shall have consented to, authorized,
permitted or approved such transactions.
(d) ADVERSE PROCEEDINGS. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or
which might affect the right of the Seller to transfer the Assets.
(e) PRIOR TRANSACTION. Prior consummation of the transactions
contemplated by the Stock Purchase Agreement.
(f) RELEASE FROM GUARANTEES. The Members shall have received a release
from all guarantees relating to obligations of the Seller.
6.3. CLOSING DELIVERIES OF SELLER. At the Closing, the Seller shall deliver
or cause to be delivered to Buyer each of the following items:
(a) a bill of sale substantially in the form attached hereto as
Exhibit B;
(b) certificates of the Secretary of the Seller attesting to the
incumbency of the Seller's officers, respectively and the authenticity of
all of Seller's Members and resolutions necessary or appropriate to
authorize the transactions contemplated by the Agreement;
(c) cross receipt executed by Seller;
(d) a certificate of Seller stating that its representations and
warranties in this Agreement are true and correct as of the Closing Date.
(e) the Title Insurance Policy;
(f) duly executed IRB Documents and such other related documents
representing and effectuating the transfer of certain rights, interests and
obligations associated with the IRBs from Seller to Buyer; and
(g) such certificates of the Seller's officers and such other
documents evidencing satisfaction of the conditions specified in this
Section 6 as the Buyer shall reasonably request.
6.4. CLOSING DELIVERIES OF THE BUYER. At the Closing, the Buyer shall
deliver or cause to be delivered to the Seller each of the following items:
(a) payment of the Purchase Price payable at Closing;
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(b) cross receipt executed by the Buyer;
(c) duly executed IRB Documents and such other related documents
representing and effectuating the transfer of certain rights, interests and
obligations associated with the IRBs from Seller to Buyer;
(d) a certificate of Buyer stating that its representations and
warranties in this Agreement are true and correct as of the Closing Date;
and
(e) a release to each of the Members from all guarantees relating to
obligations of the Seller.
7. TERMINATION OF AGREEMENT
7.1. TERMINATION BY LAPSE OF TIME. This Agreement shall terminate at 5:00
p.m. Central Standard time on March 1, 2000 if the transactions contemplated
hereby have not been consummated, unless such date is extended by the written
consent of all of the parties hereto.
7.2. TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In the event
of such termination by agreement, the Buyer shall have no further obligation or
liability to the Seller under this Agreement, and the Seller shall have no
further obligation or liability to the Buyer under this Agreement.
7.3. TERMINATION BY REASON OF BREACH. This Agreement may be terminated by
the Seller, if at any time prior to the Closing there shall occur a material
breach of any of the representations, warranties or covenants of the Buyer or
the failure by the Buyer to perform any condition or obligation hereunder, and
may be terminated by the Buyer, if at any time prior to the Closing there shall
occur a material breach of any of the representations, warranties or covenants
of the Seller or the failure of the Seller to perform any condition or
obligation hereunder.
8. ACTIONS AFTER THE CLOSING DATE
8.1. FURTHER ASSURANCES. In addition to the obligations elsewhere provided
in this Agreement, each of the Buyer and the Seller shall cooperate with the
other, shall execute and deliver, or cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer, and
shall take all other actions as the other may reasonably request from time to
time in order to effectuate the provisions and purposes of this Agreement,
consistent with the terms of this Agreement.
9. GENERAL SURVIVAL AND INDEMNIFICATION
9.1. SURVIVAL OF REPRESENTATIONS. The representations and warranties made
by the parties in this Agreement, excluding those listed in the next sentence,
shall survive the Closing for a period of one (1) year. The representations and
warranties of Section 2.12 made by Seller shall survive the Closing for a period
of five (5) years.
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9.2. INDEMNIFICATION BY THE SELLER. The Seller and its Members shall be
jointly and severally responsible to assume the defense of, and indemnify and
hold the Buyer, its affiliates and their directors, officers and employees
(collectively, the "Buyer Group") harmless from, any and all losses, damages,
costs and expenses (including, without limitation, court costs and reasonable
outside attorneys' and accountants' fees) (hereinafter individually, a "Loss"
and collectively, "Losses") suffered or incurred by any member of the Buyer
Group that relate to, or arise out of or in connection with (i) any breach of
any representation or warranty made by the Seller contained in this Agreement;
(ii) a breach of any other covenant or agreement by the Seller contained in this
Agreement; or (iii) any liability against the Buyer or the Assets arising as a
result of events occurring or circumstances existing prior to the Closing Date.
9.3. INDEMNIFICATION BY THE BUYER. The Buyer shall be responsible to assume
the defense of, and indemnify and hold the Seller, its affiliates and the
Members, officers and employees (collectively, the "Seller Group") harmless
from, any and all losses, damages, costs and expenses (including, without
limitation, court costs and reasonable outside attorneys' and accountants' fees)
(hereinafter individually, a "Loss" and collectively, "Losses") suffered or
incurred by any member of the Seller Group that relate to, or arise out of or in
connection with (i) any breach of any representation or warranty made by the
Buyer contained in this Agreement; (ii) a breach of any other covenant or
agreement by the Buyer contained in this Agreement; (iii) any liability against
the Seller Group or the Assets arising as a result of events occurring or
circumstances existing after the Closing Date.
9.4. CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification under this Section 9, the Buyer or the Seller, as the case may
be, seeking indemnification (the "Indemnified Party"), shall promptly notify the
other party (the "Indemnifying Party") of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party; provided, however, that if suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 9.5 of
this Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving notice to the Indemnifying Party as provided
in Section 9.5.
9.5. DEFENSE BY THE INDEMNIFYING PARTY. In connection with any claim which
may give rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person other than the Indemnified Party, the
Indemnifying Party, at the sole cost and expense of the Indemnifying Party, may,
upon written notice to the Indemnified Party, assume the defense of any such
claim or legal proceeding if the Indemnifying Party acknowledges to the
Indemnified Party in writing the obligation of the Indemnifying Party to
indemnify the Indemnified Party with respect to all elements of such claim. If
the Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall select counsel reasonably acceptable to
the Indemnified Party to conduct the defense of such claims or legal proceedings
and at the sole cost and expense of the Indemnifying Party shall take all steps
necessary in the defense or settlement thereof. The Indemnified Party shall
thereafter be entitled
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to participate in and assume control of the defense of any such action if the
Indemnified Party has a reasonable basis for concluding that its interests would
be better served. The Indemnifying Party shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed). The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date such claim is made: (a) the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. If the Indemnifying Party or the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such third party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third party
claim in a reasonably prudent manner.
10. GENERAL PROVISIONS
10.1. EXPENSES. All fees, commissions and other expenses incurred by the
Buyer or the Seller in connection with the negotiation of this Agreement and in
preparing to consummate the transactions contemplated hereby, including the fees
and expenses of their respective counsel and other advisors, shall be borne by
the party incurring such fee, commission or expense.
10.2. EXECUTION IN COUNTERPARTS; BINDING EFFECT. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
10.3. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Kansas, without reference
to principles of conflicts or choice of law.
10.4. NOTICES. Any other notices or other communications required or
permitted under this Agreement, shall be given in writing and shall be
sufficiently given if delivered personally, sent by facsimile, mailed first
class or sent by overnight courier guaranteeing next-day delivery, addressed as
follows:
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If to the Buyer:
Airport Systems International, Inc.
11300 West 89th Street
Overland Park, Kansas 66214
Facsimile No.: (913) 452-0870
Attention: Thomas C. Cargin
with a copy to:
Blackwell Sanders Peper Martin LLP
Two Pershing Square
2300 Main Street, Suite 1000
Kansas City, Missouri 64108
Telecopier: (816) 983-8080
Attention: Steven F. Carman, Esq.
If to the Seller:
Mr. Chris Hammond
15301 W. 109th Street
Lenexa, Kansas 66219
Telecopier: (913) 982-5766
with a copy to:
Mr. James R. Hubbard
Norton, Hubbard, Ruzicka & Kramer L.C.
130 North Cherry
Olathe, Kansas 66051
Telecopier: (913) 782-2012
Notices or communications required or permitted under this Agreement shall be
deemed to have been received by the addressee (i) on the date delivered, if
delivered personally by facsimile (ii) five days after the date of deposit, if
mailed by first class mail (iii) one day after delivery to a courier, if sent by
overnight courier guaranteeing next-day delivery or (iv) upon confirmation of
transmission, if by facsimile. Any party may change the person or address for
service of process upon it or delivery of notices or other communications to it
under this Agreement by delivering notice of such change to the other party in
accordance with this SECTION 10.4.
10.5. TITLES AND HEADINGS. Titles and headings to Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
10.6. SUCCESSORS AND ASSIGNS; BENEFICIARIES. This Agreement shall inure to
the benefit of, and be binding upon, the parties hereto and their respective
successors and permitted assigns; provided, however, that no party shall assign
any rights or delegate any of its obligations created
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under this Agreement without the prior written consent of the other party except
that Buyer may assign this Agreement and Buyer's rights and interests hereunder,
to a financial lending institution at any time without the consent of the
Seller. Nothing in this Agreement shall confer upon any person or entity not a
party to this Agreement, or the legal representatives of such person or entity,
any rights or remedies of any nature or kind whatsoever under or by reason of
this Agreement.
10.7. ENTIRE AGREEMENT. This Agreement represents the entire agreement and
understanding of the parties with reference to the transactions set forth herein
and therein, and no representations or warranties have been made in connection
with such transactions other than those expressly set forth herein and therein.
This Agreement supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements among the parties relating to the
subject matter of this Agreement.
10.8. WAIVERS AND AMENDMENTS. The Seller and the Buyer may, but shall not
be obligated to, by written notice to each other (a) extend the time for the
performance of any of the obligations or other actions of the others; (b) waive
any inaccuracies in the representations or warranties of the others contained in
this Agreement; (c) waive compliance with any of the covenants of the others
created under this Agreement; or (d) waive fulfillment of any of the conditions
to its own obligations under this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach, whether or not similar. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
Seller and the Buyer.
10.9. SEVERABILITY. This Agreement shall be deemed severable and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement, all as of
the day and year first above written.
KHC OF LENEXA, L.L.C.
By:__________________________________
Name:________________________________
Title:_______________________________
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:__________________________________
Keith S. Cowan, President
DCI, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
MEMBERS
__________________________________
Chris I. Hammond
__________________________________
William D. Cook
__________________________________
Larry C. Klusman
22
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of the 10th
day of January, 2000, by and among Airport Systems International, Inc., a Kansas
corporation with its principal office at 11300 West 89th Street, Overland Park,
Kansas, 66214 (the "Buyer"), DCI, Inc., a Kansas corporation with its principal
office at 15301 W. 109th Street, Lenexa, Kansas 66219 (the "Company"), Chris I.
Hammond, Larry C. Klusman and William D. Cook (collectively referred to herein
as the "Sellers").
RECITALS
1. The Sellers own all of the issued and outstanding shares of the common
stock, $1.00 par value per share, of the Company (the "Company Shares").
2. The Buyer desires to purchase, and the Sellers desire to sell, the
Company Shares and certain intangible assets owned by them and relating to the
business of the Company for the consideration set forth below, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE COMPANY SHARES AND INTANGIBLE ASSETS
1.1 PURCHASE OF THE COMPANY SHARES AND INTANGIBLE ASSETS FROM THE SELLERS.
Subject to and upon the terms and conditions of this Agreement, at the closing
of the transactions contemplated by this Agreement (the "Closing"):
(a) the Sellers shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase, acquire and accept from Sellers,
all of the Company Shares; and
(b) the Sellers shall sell, assign and deliver to Buyer and Buyer
shall purchase and accept from Sellers, all of Seller's right, title and
interest to all of the intangible assets necessary to conduct or used by
Sellers in connection with the operation of the Company's business
including, but not limited to, the ongoing business and customer
relationships possessed by Sellers, Sellers' industry knowledge and
Sellers' familiarity and relationships with suppliers (collectively
referred to herein as the "Intangible Assets").
1.2 PURCHASE PRICE FOR THE COMPANY SHARES AND INTANGIBLE ASSETS.
(a) The consideration to be paid for the Company Shares and the
Intangible Assets shall be the sum of Two Million Nine Hundred Thirty-Two
Thousand Dollars ($2,932,000), subject to adjustment after Closing pursuant
to Section 1.4(b) hereof (the "Purchase Price").
<PAGE>
(i) At Closing, Buyer shall pay to the Sellers the portion of the
Purchase Price equal to $1,234,000 by wire transfer of immediately
available funds to accounts designated by the Sellers; and
(ii) At Closing, the Buyer shall issue to the Sellers shares of
Buyer's common stock ("ASII Common Stock"), $.01 par value per share. Buyer
shall deliver a certificate or certificates representing 150,000 shares of
ASII Common Stock, to be allocated among the Sellers as instructed by the
Sellers and imprinted with the Sellers' names.
(iii) At Closing, the Buyer shall deliver to Seller a four-year
promissory note in the amount of $1,248,000 (the "Note"). The Note shall be
secured by a second position on the assets of DCI which second position
shall be subordinated to any security interests granted at Closing or any
future security interest granted on such assets for cash committed to Buyer
on any future financings, and shall bear interest (payable quarterly) at
eight percent (8%) with principal payable semi-annually in eight (8) equal
payments of $156,000. The Note shall also be secured by a third position on
the assets currently owned by KHC of Lenexa L.L.C. (the "KHC Assets"),
which third position shall be subordinated as described above and shall be
subordinated to the security interests for industrial revenue bond
financing currently in place. In addition, the Note shall require payment
in full upon the occurrence of a change of control, as therein defined.
1.3 CLOSING. The Closing shall take place at the offices of Blackwell
Sanders Peper Martin LLP, 2300 Main Street, Suite 1100, Kansas City, Missouri
64108 at 10:00 a.m., local time, on February 4th, 2000, or at such other place,
time or date as may be mutually agreed upon in writing by the parties (such date
and time being referred to herein as the "Closing Date"). The transfer of the
Company Shares and the ASII Common Stock shall be deemed to occur at 10:00 a.m.,
central standard time, on the Closing Date.
1.4 ALLOCATION OF PURCHASE PRICE. The aggregate amount of the Purchase
Price shall be allocated among the Company Shares and the Intangible Assets in a
manner mutually acceptable to the parties and as set forth on SCHEDULE 1.4
attached hereto.
1.5 DELIVERY OF SHARES. At the Closing, Sellers shall deliver to the Buyer
certificates evidencing the Company Shares duly endorsed in blank or with stock
powers duly executed by the Sellers.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EACH OF THE SELLERS
The Company and each of the Sellers hereby represents and warrants to the
Buyer as follows:
2.1 TITLE TO SHARES. The Sellers have good and marketable title to the
Company Shares which are to be transferred to the Buyer by the Sellers pursuant
hereto, free and clear of any and all covenants, conditions, restrictions,
voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever.
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2.2 AUTHORITY. The Sellers have the full right, power and authority to
enter into this Agreement and to transfer, convey and sell to the Buyer at the
Closing the Company Shares to be sold by the Sellers hereunder and, upon
consummation of the purchase contemplated hereby, the Buyer will acquire from
the Sellers good and marketable title to the Company Shares, free and clear of
all covenants, conditions, restrictions, voting trust arrangements, liens,
charges, encumbrances, options and adverse claims or rights whatsoever.
2.3 EXECUTION AND DELIVERY. The Sellers are not a party to, subject to or
bound by any agreement or any judgment, order, writ, prohibition, injunction or
decree of any court or other governmental body which would prevent the execution
or delivery of this Agreement by the Sellers or the transfer, conveyance and
sale of the Company Shares to be sold by the Sellers to the Buyer pursuant to
the terms hereof.
2.4 BROKERS. No broker or finder has acted for the Sellers in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of the Sellers.
2.5 CAPITALIZATION OF THE COMPANY. The Company's authorized capital stock
consists of 500 shares of common stock, $1.00 par value per share, of which 300
shares are issued and outstanding on the date hereof and held of record and
beneficially by the Sellers in the amounts allocated as set forth on SCHEDULE
2.5 attached hereto. All such issued and outstanding shares of common stock have
been and, on the Closing Date, will be duly and validly issued and are, or will
be on such date, fully paid and non-assessable. Except as set forth in SCHEDULE
2.5 attached hereto, there are not, and on the Closing Date there will not be,
outstanding (a) any options, warrants or other rights to purchase from the
Company any capital stock of the Company, (b) any securities convertible into or
exchangeable for shares of such stock; or (c) any other commitments of any kind
for the issuance of additional shares of capital stock or options, warrants or
other securities of the Company.
2.6 ORGANIZATION AND STATUS OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Kansas, and has all requisite power and authority (corporate or
otherwise) to execute and deliver this Agreement and the agreements contemplated
herein, and to consummate the transactions contemplated hereby and thereby. The
Company has all requisite corporate power to own its properties and carry on its
business as now being conducted and is duly qualified to do business in each
jurisdiction in which the nature of its business or properties make such
qualification necessary. The jurisdictions where the Company is so qualified are
set forth in SCHEDULE 2.6. Complete and correct copies of the Articles of
Incorporation and By-Laws, each as amended to the date hereof, for the Company
are set forth in SCHEDULE 2.6.
2.7 NO SUBSIDIARIES OR AFFILIATED ENTITIES. Except as set forth in SCHEDULE
2.7, the Company does not own an equity interest representing 50 percent or more
of the capital stock or other equity interest in any corporation, partnership,
joint venture or other entity.
2.8 AUTHORIZATION. The execution and delivery by the Company of this
Agreement and the agreements to be executed by the Sellers and/or the Company
hereunder and to be
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delivered by the Sellers and/or the Company at Closing, and the consummation by
the Company and Sellers of all transactions contemplated hereunder and
thereunder by the Company, have been duly authorized by all requisite corporate
action and necessary shareholder approval (none of which actions or approvals
has been modified or rescinded and all of which actions and approval are in full
force and effect.) This Agreement has been duly executed by the Company and the
Sellers. This Agreement and all other agreements and obligations entered into
and undertaken in connection with the transactions contemplated hereby to which
the Company or the Sellers is a party constitute the valid and legally binding
obligations of the Company and the Sellers, enforceable against them in
accordance with their respective terms. The execution, delivery and performance
by the Company and the Sellers of this Agreement and the agreements provided for
herein, and the consummation by the Company and the Sellers of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Company or the Sellers; (b) violate the provisions
of the Articles of Incorporation or Bylaws of the Company; (c) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Company or the Company Shares pursuant to any indenture, mortgage,
deed of trust or other instrument or agreement to which the Company or any of
the Sellers is a party or by which the Company or any of the Sellers or any of
their respective properties is or may be bound. SCHEDULE 2.8 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation of the
transactions contemplated by this Agreement.
2.9 FINANCIAL STATEMENTS.
(a) The Sellers has previously delivered to the Buyer the unaudited
balance sheet of the Company as of December 31, 1998 and 1997 (the "Prior
Year Balance Sheets") and the related statements of income, shareholder's
equity, retained earnings and changes in financial condition of the Company
for the fiscal year then ended (collectively, the "Prior Year Financial
Statements"). The Sellers have also delivered to the Buyer, prior to the
Closing Date, the unaudited balance sheet of the Company as of September
30, 1999 (the "Current Balance Sheet") and the related statements of
income, shareholder's equity, retained earnings and changes in financial
condition of the Company for the three-month period then ended
(collectively, the "Current Financial Statements"). The Prior Year
Financial Statements and the Current Financial Statements (collectively,
the "Financial Statements") have been prepared in accordance with generally
accepted accounting principles, applied consistently, with past practices
and have been (or will be) certified by the Company's chief financial
officer. The date of the Prior Year Balance Sheets is hereinafter referred
to as the "Balance Sheet Date."
(b) To the best knowledge of the Sellers, the Financial Statements
fairly present, as of their respective dates, the financial condition,
retained earnings, assets and liabilities of the Company and the results of
operations of the Company's business for the periods indicated. With
respect to contracts and commitments for the sale of goods or the provision
of services by the Company, the Financial Statements contain and reflect
adequate reserves consistent with previous reserves taken for all
reasonably anticipated
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material losses and costs and expenses. The amounts shown as accrued for
current and deferred income and other taxes in the Financial Statements are
sufficient for the payment of all accrued and unpaid federal, state and
local taxes, interest, penalties, assessments or deficiencies applicable to
the Company, whether disputed or not, for the applicable period then ended
and periods prior thereto.
2.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent (a)
reflected and reserved against in the Current Balance Sheet, (b) set forth on
SCHEDULE 2.10 attached hereto, or (c) incurred in the ordinary course of
business after the date of the Current Balance Sheet and not material in amount,
either individually or in the aggregate, to the best knowledge of the Sellers,
the Company does not have any liability or obligation, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise, which is
material to the condition (financial or otherwise) of the assets, properties,
business or prospects of the Company taken as a whole. For purposes of this
Agreement, "material" means any amount in excess of $25,000.
2.11 LITIGATION. Except as set forth on SCHEDULE 2.11 attached hereto, (a)
there is no action, suit or proceeding to which the Company is a party (either
as a plaintiff or defendant) pending or, to the best knowledge of the Sellers,
threatened before any court or governmental agency, authority, body or
arbitrator and, to the best knowledge of the Sellers, there is no basis for any
such action, suit or proceeding; (b) neither the Company, nor, to the best
knowledge of the Sellers, any officer, director or employee of any of the
Company, has been permanently or temporarily enjoined by any order, judgment or
decree of any court or any governmental agency, authority or body from engaging
in or continuing any conduct or practice in connection with the business,
assets, or properties of the Company; and (c) there is not in existence on the
date hereof any order, judgment or decree of any court, tribunal or agency
related to the Company. Except as set forth on SCHEDULE 2.11 attached hereto,
there is no action, suit or proceeding to which one or more of the Sellers is a
party that may impact the contemplated transactions or the Company Shares.
2.12 INSURANCE. SCHEDULE 2.12 attached hereto sets forth a true, correct
and complete list of all fire, theft, casualty, general liability, workers'
compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies maintained by the Company and
of all life insurance policies maintained on the lives of any of their
employees, specifying the type of coverage, the amount of coverage, the premium,
the insurer and the expiration date of each such policy (collectively, the
"Insurance Policies") and all claims made under such Insurance Policies since
January 1, 1997. True, correct and complete copies of all Insurance Policies
have been previously delivered by the Sellers or the Company to the Buyer. The
Insurance Policies are in full force and effect and are in amounts of a nature
which are adequate and customary for the Company's business. All premiums due on
the Insurance Policies or renewals thereof have been paid and there is no
default under the Insurance Policies. Except as set forth on SCHEDULE 2.12, the
Company has not received any notice or other communication from any issuer of
the Insurance Policies since January 1, 1999 canceling or materially amending
any of the Insurance Policies, materially increasing any deductibles or retained
amounts thereunder, or materially increasing the annual or other premiums
payable thereunder, and, to the best knowledge of the Sellers, no such
cancellation, amendment or increase of deductibles, retainages or premiums is
threatened. Except as set forth on SCHEDULE 2.12, the Company does not have has
any outstanding claims or any dispute with any
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insurance carrier regarding claims, settlements or premiums, and the Company has
not failed to give any notice or present any claim under any Insurance Policy in
due and timely fashion. There are no outstanding requirements or recommendations
by any issuer of the Insurance Policies or by any Board of Fire Underwriters or
other similar body exercising similar functions or by any governmental authority
exercising similar functions which requires or recommends any changes in the
conduct of the business of, or any repairs or other work to be done on or with
respect to any of the properties or assets owned or leased by, the Company.
2.13 PERSONAL PROPERTY. SCHEDULE 2.13 attached hereto sets forth (i) a
true, correct and complete list of all items of tangible personal property owned
by the Company as of the date hereof having either a net book value per unit or
an estimated fair market value per unit in excess of $2,500; or not owned by the
Company but in the possession of or used in the business of the Company and
having rental payments therefor in excess of $250 per month or $3,000 per year
(collectively, the "Personal Property"); and (ii) a description of the owner of,
and any agreement relating to the use of, each item of Personal Property not
owned by the Company and the circumstances under which such Property is used.
Except as disclosed in SCHEDULE 2.13:
(a) The Company has good and marketable title to each item of Personal
Property free and clear of all liens, leases, encumbrances, claims under
bailment and storage agreements, equities, conditional sales contracts,
security interests, charges and restrictions, except for liens, if any, for
personal property taxes not due;
(b) No officer, director, employee nor any of the Sellers of the
Company nor any spouse, child or other relative or affiliate thereof, owns
directly or indirectly, in whole or in part, any of the Personal Property
described in SCHEDULE 2.13;
(c) Each item of Personal Property not owned by the Company is in such
condition that upon the return of such property to its owner in its present
condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between the Company and the owner
or lessor thereof, the obligations of the Company to such owner or lessor
will be discharged;
(d) The Personal Property is in good operating condition and repair,
normal wear and tear excepted, is currently used by the Company in the
ordinary course of its business, and normal maintenance has been
consistently performed with respect to the Personal Property; and
(e) The Company owns or otherwise has the right to use all of the
Personal Property now used by it in the operation of its business or the
use of which is necessary for the performance of any material contract,
letter of intent or proposal to which it is a party.
2.14 INTANGIBLE PROPERTY. SCHEDULE 2.14 attached hereto sets forth: (i) a
true, correct and complete list and, where appropriate, a description of, all
items of intangible property owned by, or used in the business of, the Company,
including, but not limited to, trade secrets, United States and foreign patents,
trade names, trademarks, trade name and trademark registrations, copyrights and
copyright registrations, and applications for any of the foregoing (the
"Intangible
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Property"); and (ii) a true, correct and complete list of all licenses or
similar agreements or arrangements to which the Company is a party, either as
licensee or licensor, with respect to the Intangible Property. Except as
otherwise disclosed in SCHEDULE 2.14:
(a) The Company is the sole and exclusive owner of all right, title
and interest in and to the Intangible Property and all designs, permits,
and instruction and procedures manuals, used on or in connection therewith,
free and clear of all liens, security interests, charges, encumbrances,
equities and other adverse claims;
(b) The Company has the right and authority to use the Intangible
Property in connection with the conduct of its business in the manner
presently conducted, and such use does not conflict with, infringe upon or
violate any rights of any other person, corporation or entity;
(c) Neither the Company nor the Sellers have received notice of, or
have any knowledge of any basis for, a pending or threatened claim,
interference action or other judicial or adversarial proceeding against the
Company that any of the Company's operations, activities, products,
services or publications infringes any patent, trademark, trade name,
copyright, trade secret or other property right of a third party, or that
it is illegally or otherwise using the trade secrets or property rights of
others;
(d) There are no outstanding, nor to the best knowledge of the
Sellers, any threatened disputes or other disagreements with respect to any
licenses or similar agreements or arrangements described in SCHEDULE 2.14
or with respect to infringement by a third party of any of the Intangible
Property;
(e) The Intangible Property owned or licensed by the Company is
sufficient to conduct the Company's business as presently conducted;
(f) The Company has taken all steps reasonably necessary to protect
its right, title and interest in and to the Intangible Property; and
(g) No officer, director, employee nor any of the Sellers of the
Company, nor any spouse, child or other relative or affiliate thereof, owns
directly or indirectly, in whole or in part, any of the Intangible
Property.
2.15 LEASES. SCHEDULE 2.15 attached hereto sets forth (a) a true, correct
and complete list as of the date hereof of all leases of real property,
identifying separately each ground lease, to which the Company is a party
(collectively, the "Leases"). The real property that is the subject of all such
Leases shall be referred to herein as the "Real Estate." True, correct and
complete copies of all Leases and all amendments, modifications and supplemental
agreements thereto, have previously been delivered by the Sellers or the Company
to the Buyer. The Leases are in full force and effect, are binding and
enforceable against each of the parties thereto in accordance with their
respective terms and, except as set forth on SCHEDULE 2.15, have not been
modified or amended since the date of delivery to the Buyer. No party to any
Lease has sent written notice to the other claiming that such party is in
default thereunder and that such default remains uncured. Except as set forth on
SCHEDULE 2.15, there has not occurred any event which would constitute a breach
of or default in the performance of any covenant, agreement or condition
contained in any
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Lease, nor has there occurred any event which with the passage of time or the
giving of notice or both would constitute such a breach or material default. The
Company is not obligated to pay any leasing or brokerage commission relating to
any Lease and, except as set forth on SCHEDULE 2.15, will not have any
obligation to pay any leasing or brokerage commission upon the renewal of any
Lease. Except as set forth on SCHEDULE 2.15, no construction, alteration or
other leasehold improvement work with respect to any of the Leases remains to be
paid for or to be performed by the Company. The Financial Statements contain
adequate reserves to provide for the restoration of the property subject to the
Leases at the end of the respective Lease terms, to the extent required by the
Leases.
2.16 INVENTORY. SCHEDULE 2.16 attached hereto sets forth a summary of the
inventory of the Company (the "Inventory"), with aggregate dollar amounts for
each category of Inventory, as of the date hereof. The Inventory consists of
items of a quality and quantity which are usable or saleable, without discount,
in the ordinary course of the business conducted by the Company, assuming sales
are at current levels. The value of all items of obsolete materials and of
materials of below standard quality have been written down to realizable market
value and the values at which such inventory is carried reflect the normal
Inventory valuation policy of the Company of stating Inventory at the lower of
cost or market value in accordance with generally accepted accounting
principles.
2.17 ACCOUNTS RECEIVABLE. SCHEDULE 2.17 attached hereto sets forth a true,
correct and complete list of the accounts and notes receivable of the Company
(the "Accounts Receivable"), including the aging thereof as of the date hereof.
All Accounts Receivable arose out of the sales of inventory or services in the
ordinary course of business and are collectible in the face value thereof within
90 days after the date of invoice, using normal collection procedures, net of
the reserve for doubtful accounts set forth thereon, which reserve is adequate
and was calculated in accordance with generally accepted accounting principles
consistently applied.
2.18 TAX MATTERS.
(a) Except as set forth on SCHEDULE 2.18 attached hereto:
(i) within the times and in the manner prescribed by law, the
Company has filed all federal, state and local tax returns and all tax
returns for foreign countries, provinces and other governing bodies
having jurisdiction to levy taxes upon them which are required to be
filed;
(ii) the Company has paid all taxes, interest, penalties,
assessments and deficiencies which have become due or which have been
claimed to be due, including without limitation income, franchise,
real estate, sales and withholding taxes and other employee benefits,
taxes and imports;
(iii) all tax returns filed by the Company for the taxable years
ending December 31, 1994 through December 31, 1998 constitute complete
and accurate representations of the tax liabilities of the Company for
such years and accurately set forth all items (to the extent required
to be included or reflected in such
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returns) relevant to their future tax liabilities, including the tax
bases of their properties and assets;
(iv) the Company has not waived or extended any applicable
statute of limitations relating to the assessment of federal, state,
local or foreign taxes;
(v) no examinations of the federal, state, local or foreign tax
returns of the Company is currently in progress nor, to the best
knowledge of the Sellers, threatened, and no deficiencies have been
asserted or assessed against the Company as a result of any audit by
the Internal Revenue Service or any state or local taxing authority
and no such deficiency has been proposed or threatened;
(vi) the Company has not filed a consent pursuant to Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code")
relating to collapsible corporations nor has the Company agreed to
have Section 341(f)(2) of the Code apply to any disposition of a
Section (f) asset (as such term is defined in Section 341(f)(4) of the
Code); and
(vii) since January 1, 1996, the Company has not participated in
or cooperated with an international boycott, within the meaning of
Section 999 of the Code, nor has the Company had operations which are
or may hereafter become reportable under Section 999 of the Code.
(b) SCHEDULE 2.18 attached hereto sets forth those taxable years for
which the tax returns of the Company have been reviewed or audited by
applicable federal, state, local and foreign taxing authorities and those
tax years for which said tax returns have received clearances or other
indications of approval from applicable federal, state, local and foreign
taxing authorities. No issue or issues have been raised in connection with
any prior or pending review or audit of said federal, state, local or
foreign tax returns which the Sellers reasonably believe may be expected to
be raised in the future by such taxing authorities in connection with the
audit or review of the tax returns of the Company.
2.19 BOOKS AND RECORDS. The general ledgers and books of account of the
Company and all federal, state and local income, franchise, property and other
tax returns filed by the Company are in all material respects complete and
correct and have been maintained in accordance with good business practice and
in accordance with all applicable procedures required by laws and regulations.
2.20 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 2.20 attached hereto contains a true, complete and
correct list and description of the following contracts and agreements,
whether written or oral (collectively, the "Contracts"):
(i) All loan agreements, indentures, mortgages and guaranties to
which the Company is a party or by which the Company or any of its
property is
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bound including but not limited to, the Company's third party loans
with Bank of America;
(ii) All pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, personal property leases
and lease purchase agreements to which the Company is a party or by
which the Company or any of its property is bound;
(iii) All contracts, agreements, commitments, purchase orders or
other understandings or arrangements to which the Company is a party
or by which the Company or any of its property is bound which (A)
involve aggregate payments or receipts by the Company of more than
$2,500 in the case of any single contract, agreement, commitment,
understanding or arrangement under which full performance (including
payment) has not been rendered by all parties thereto or (B) which may
materially adversely affect the condition (financial or otherwise) or
the properties, assets, business or prospects of the Company;
(iv) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, pension plans, retirement plans,
employee stock option or stock purchase plans and group life, health
and accident insurance and other employee benefit plans, agreements,
arrangements or commitments to which the Company is a party or by
which the Company or any of its property is bound;
(v) All agency, distributor, sales representative, franchise or
similar agreements to which the Company is a party or by which the
Company or any of its property is bound;
(vi) All contracts, agreements or other understandings or
arrangements between the Company and the Sellers (including, but not
limited to, any tax sharing arrangements) or their affiliates;
(vii) All leases, whether operating, capital or otherwise, under
which the Company is lessor or lessee;
(viii) All contracts, agreements and other documents or
information relating to past disposal of waste (whether or not
hazardous);
(ix) All contracts, agreements or other arrangements imposing a
non-competition or non-solicitation obligation on the Company or any
of its employees; and
(x) Any other material agreements or contracts entered into by
the Company.
(b) Except as set forth on SCHEDULE 2.20:
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(i) Each Contract is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms;
and the Company does not have any knowledge that any Contract is not a
valid and binding agreement of the other parties thereto;
(ii) The Company has fulfilled all material obligations required
pursuant to the Contracts to have been performed by the Company on its
part prior to the date hereof; and the Company has no reason to
believe that it will not be able to fulfill, when due, all of its
obligations under the Contracts which remain to be performed after the
date hereof;
(iii) The Company is not in breach of or default under any
Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a
loss of rights or result in the creation of any lien, charge or
encumbrance, thereunder or pursuant thereto;
(iv) To the best knowledge of the Sellers, there is no existing
breach or default by any other party to any Contract, and no event has
occurred which with the passage of time or giving of notice or both
would constitute a default by such other party, result in a loss of
rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto;
(v) There are not and, since January 1, 1998, have not been, any
claims of a non-routine nature relating to the Company by customers of
the Company;
(vi) The Company is not restricted by any Contract from carrying
on its business anywhere in the world;
(vii) The Company does not have any written or oral contracts to
sell products or perform services that are expected to be performed
at, or to result in, a loss;
(viii) The Company has not experienced any shortages of
components or other supplies (collectively "Supplies") or qualified
employees within the 12-month period preceding the date hereof, and
the Company has on hand, or has reason to believe it can timely
obtain, a sufficient quantity of Supplies and employees to satisfy all
outstanding orders heretofore received and all orders anticipated to
be received from the date hereof through the Closing Date; and (ix)
The Company has not experienced any shortages of raw materials ("Raw
Materials") within the 12-month period preceding the date hereof, and
the Company has on hand, or has reason to believe it can timely
obtain, a sufficient quantity of Raw Materials to satisfy all
outstanding orders heretofore received and all orders anticipated to
be received through the Closing Date.
(c) True, correct and complete copies of all Contracts have previously
been delivered by the Company or the Sellers to the Buyer.
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2.21 COMPLIANCE WITH AGREEMENTS AND LAWS.
(a) The Company has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal, state and
local authorities necessary to conduct its business and own and operate its
assets (collectively, the "Permits"). SCHEDULE 2.21 attached hereto sets
forth a true, correct and complete list of all such Permits, copies of
which have previously been delivered by the Company or the Sellers to the
Buyer. The Company has not received written notice that it is in violation
of any law, regulation or ordinance (including, without limitation, laws,
regulations or ordinances relating to building, zoning, environmental,
disposal of hazardous substances, land use or similar matters) relating to
its properties. To the best knowledge of the Sellers, the business of the
Company as conducted since January 1, 1998 has not violated, and on the
date hereof does not violate, in any material respect, any federal, state,
local or foreign laws, regulations or orders (including, but not limited
to, any of the foregoing relating to employment discrimination,
occupational safety, environmental protection, hazardous waste,
conservation, or corrupt practices, including the Foreign Corrupt Practices
Act), the enforcement of which would have a material adverse effect on the
results of operations, condition (financial or otherwise), assets,
properties, business or prospects of the Company. Except as set forth on
SCHEDULE 2.21, the Company has not had notice or communication from any
federal, state or local governmental or regulatory authority or otherwise
of any such violation or noncompliance.
2.22 ENVIRONMENTAL.
(a) For purposes of this Section:
(i) "Hazardous Materials" means any hazardous, infectious or
toxic substance, chemical, pollutant, contaminant, emission or waste
which is regulated by any local, state, federal or foreign authority.
Hazardous Materials include, without limitation, anything which is:
(i) defined as a "pollutant" pursuant to 33 U.S.C. Section 1362(6);
(ii) defined as a "hazardous waste" pursuant to 42 U.S.C. Section
6921; (iii) defined as a "regulated substance" pursuant to 42 U.S.C.
Section 6991; (iv) defined as a "hazardous substance" pursuant to 42
U.S.C. Section 9601(14); (v) defined as a "pollutant or contaminant"
pursuant to 42 U.S.C. Section 9601(33); (vi) petroleum; (vii)
asbestos; and (viii) polychlorinated biphenyl.
(ii) "Environmental Laws and Regulations" means all limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Laws relating
to pollution, nuisance, health, safety or the environment including,
without limitation, (i) the Federal Clean Air Act, 42 U.S.C. Sections
7401 ET SEQ.; (ii) the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sections 9601 ET SEQ.;
(iii) the Federal Emergency Planning and Community Right-to-Know Act,
42 U.S.C. Sections 1101 ET SEQ.; (iv) the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Sections 136 ET SEQ.; (v) the
Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ.;
(vi) the Solid
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Waste Disposal Act, 42 U.S.C. Sections 6901 ET SEQ.; (vii) the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 ET seq.; (viii) Laws
relating in whole or part to emissions, discharges, releases, or
threatened releases of any Hazardous Material; and (ix) Laws relating
in whole or part to the manufacture, processing, distribution, use,
coverage, disposal, transportation, storage or handling of any
Hazardous Material.
(b) To the best knowledge of Sellers, the operations and activities of
Sellers and the Company have complied, and until the Closing Date will
comply, in all respects, with all Environmental Laws and Regulations.
(c) To the best knowledge of Sellers, there is no civil, criminal,
administrative or other action, suit, demand, claim, hearing, notice of
violation, proceeding, investigation, notice or demand pending, received,
or threatened against the Sellers or the Company relating in any way to any
Environmental Laws and Regulations.
(d) Neither the Sellers nor the Company have received notice or
indication from any Governmental Authority or private or public entity
advising it that it is or may be responsible for any investigation or
response costs with respect to a release, threatened release or cleanup of
chemicals or materials produced by or resulting from any business,
commercial or industrial activities, operations or processes, including,
without limitation, any Hazardous Materials.
2.23 EMPLOYEE RELATIONS.
(a) To the best knowledge of Sellers, the Company is in compliance
with all federal, state and municipal laws respecting employment and
employment practices, terms and conditions of employment, and wages and
hours, and is not engaged in any unfair labor practice, and there are no
arrears in the payment of wages or social security taxes.
(b) To the best knowledge of Sellers, except as set forth on SCHEDULE
2.23 attached hereto:
(i) None of the employees of the Company is represented by any
labor union;
(ii) There is no unfair labor practice complaint against the
Company pending before the National Labor Relations Board or any state
or local agency;
(iii) There is no pending labor strike or other material labor
trouble affecting the Company (including, without limitation, any
organizational drive);
(iv) There is no material labor grievance pending against the
Company;
(v) There is no pending union representation effort respecting
the employees of the Company;
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(vi) There are no pending arbitration proceedings arising out of
or under any collective bargaining agreement to which the Company is a
party, or to the best knowledge of the Sellers, any basis for which a
claim may be made under any collective bargaining agreement to which
the Company is a party; and
(vii) The Company does not have any continuing obligation for
health, life, medical insurance or other similar fringe benefits to
any former employee of the Company.
(c) The Company has provided to the Buyer a true, correct and complete
list of the current payroll of the Company, including the job descriptions
and salary or wage rates for each department manager, showing separately
for each such person the amounts paid or payable as salary and bonus
payments for the fiscal year ended December 31, 1998.
(d) For purposes of this Section 2.23, the term "employee" shall be
construed to include sales agents and other independent contractors who
spend a majority of their working time on the business of the Company.
2.24 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE PLANS. SCHEDULE 2.24 attached hereto contains a true,
correct and complete list of all pension, benefit, profit sharing,
retirement, deferred compensation, welfare, insurance, disability, bonus,
vacation pay, severance pay and other similar plans, programs and
agreements, whether reduced to writing or not ("Employee Plans"), relating
to the employees of the Company, or maintained at any time since January
1, 1997 by the Company or by any member of any controlled group of
corporations, group of trades or businesses under common control, or
affiliated service group (as defined for purposes of Section 414(b), (c)
and (m), respectively, of the Code) (the "Company Employee Plans") of
which it is or has been a member which shall be referred to herein as a
"Member of the Controlled Group") and, except as set forth on SCHEDULE
2.24, the Company has no obligations, contingent or otherwise, past or
present, under applicable law or the terms of any Employee Plan. The
Company has not contributed to, and does not have any past or present
obligation to contribute to, any stock option or stock purchase plan or
other plan designed to hold the stock of the Company or any of its
affiliates. No employee of the Company participates in an Employee Plan
that is sponsored or maintained by an entity other than the Company and no
one other than Company employees and their beneficiaries or dependents
participate in an Employee Plan sponsored or maintained by the Company.
(b) PROHIBITED TRANSACTIONS. Neither the Company nor any of its
directors, officers, employees or agents, or any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Code has, with respect to any Employee Plan, engaged in
or been a party to any nonexempt "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, in connection
with which, directly or indirectly, the Buyer or any of its affiliates,
directors or employees or
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any Employee Plan or any related funding medium could be subject to either
a penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code.
(c) COMPLIANCE. To the best knowledge of Sellers, with respect to all
Company Employee Plans, the Company is in compliance with the terms of the
plans and the requirements prescribed by any and all statutes, orders or
governmental rules or regulations currently in effect, including, but not
limited to, ERISA and the Code, applicable to such Company Employee Plans.
To the best knowledge of Sellers, the Company has in all respects performed
all obligations required to be performed by it under, and is not in
violation in any respect of, and there has been no default or violation by
any other party with respect to, any of the Company Employee Plans. Except
as set forth on SCHEDULE 2.24, none of the Company Employee Plans which are
subject to Title IV of ERISA has been or will be terminated in whole or in
part within the meaning of ERISA or the Code; no liability has been
incurred to, nor has any event or circumstance occurred, nor will any event
or circumstance occur prior to the Closing Date, which could result in such
a liability being asserted by, the Pension Benefit Guaranty Corporation
with respect to any Company Employee Plan (other than the payment of annual
premiums under Section 4007 of ERISA); nor has any Company Employee Plan
that is subject to Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code, or both, incurred any "accumulated funding deficiency" (as
defined in ERISA), whether or not waived; nor has the Company failed to pay
any amounts due and owing as required by the terms of any Company Employee
Plan; nor has there been any "reportable event" within the meaning of
Section 4043(b)(l)-(9) of ERISA, or any event described in Section 4063(a)
of ERISA, with respect to any Company Employee Plan, other than as
disclosed herein or on accompanying schedules.
(d) MULTI EMPLOYER PLANS. Except as set forth on SCHEDULE 2.24,
neither the Company nor any Member of the Controlled Group has ever been
obligated to contribute to any "multi employer plan", as such term is
defined in Section 3(37) of ERISA. Neither the Company nor any Member of
the Controlled Group has any "withdrawal liability", as computed under
Section 4211 of ERISA, with respect to any such plan and the Company and
each Member of the Controlled Group has made all contributions to any such
plan as are required through the Closing Date under the terms of any such
plans or applicable statutes, regulations, rulings and other applicable
law; and no event has occurred, or can occur prior to the Closing Date,
which could give rise to any other liability (other than a continuing
obligation to contribute to such plan(s) under the terms of any applicable
collective bargaining agreements) on the part of the Company or any Member
of the Controlled Group, the Buyer, or their affiliates, officers,
employees or directors with respect to such plan(s).
(e) COPIES OF COMPANY EMPLOYEE PLANS AND RELATED DOCUMENTS. The
Sellers or the Company have previously delivered to the Buyer true, correct
and complete copies of all Company Employee Plans which have been reduced
to writing and written descriptions of all Company Employee Plans which
have not been reduced to writing, and all agreements, including trust
agreements and insurance contracts, related to such Company Employee Plans,
and the Summary Plan Description and all modifications
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thereto for each Company Employee Plan communicated to employees. With
respect to each Company Employee Plan that is a "defined benefit plan", as
such term is defined in Section 3(35) of ERISA (the "Defined Benefit
Plans"), true, correct and complete copies of (i) the annual actuarial
valuation reports for the last five years, (ii) the Form 5500 and Schedule
A or B thereto, or both, filed for the last five years and (iii) any
filings made with the Pension Benefit Guaranty Corporation, Internal
Revenue Service or Department of Labor, or any correspondence with or from
such agencies, regarding the termination of any such Defined Benefit Plan,
have been delivered to the Buyer.
(f) QUALIFICATIONS. Each Company Employee Plan and all amendments
thereto intended to qualify under Section 401(a) of the Code have been
determined by the Internal Revenue Service to so qualify, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501(a) of the Code, and copies of all determination
letters with respect to each such Company Employee Plan have been
previously delivered by the Sellers or the Company to the Buyer, and
nothing has since occurred, or will occur prior to the Closing Date, which
might cause the loss of such qualification or exemption, no such Company
Employee Plan has been operated in a manner which would cause it to be
disqualified in operation, and all such Company Employee Plans have been
administered in compliance with and consistent with all applicable
requirements of the Code and ERISA, including, without limitation, all
reporting and disclosure requirements.
(g) FUNDING STATUS.
(i) There is no Company Employee Plan that is a funded Defined
Benefit Plan.
(ii) With respect to each Company Employee Plan which is a
qualified profit-sharing or stock bonus plan, as defined in ERISA, all
employer contributions accrued for plan years ending prior to the
Closing Date under the Company Employee Plan terms and applicable law
have been made by the Company.
(iii) All premiums or other payments required by the terms of any
group or individual insurance policies and programs maintained by the
Company Employee Plan with respect to all periods up to and including
the Closing Date have been fully paid for the length of the
obligation.
(h) CLAIMS AND LITIGATION. There are no threatened or pending claims,
suits or other proceedings by present or former employees of the Company or
their affiliates, plan participants, beneficiaries or spouses of any of the
above, including claims against the assets of any trust, involving any
Company Employee Plan, or any rights or benefits thereunder, other than
ordinary and usual claims for benefits by participants or beneficiaries.
(i) NO IMPLIED RIGHTS. Nothing expressed or implied herein shall
confer upon any past or present employee of the Company, its
representatives, beneficiaries,
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successors and assigns, nor upon any collective bargaining agent, any
rights or remedies of any nature, including, without limitation, any rights
to employment or continued employment with the Buyer, the Company, or any
successor or affiliate; nor shall the Buyer, the Company or their
affiliates be precluded or prevented from terminating or amending any
Company Employee Plan.
(j) TRANSFER. The Company shall take any actions as may be necessary
or appropriate in the reasonable opinion of the Buyer and the Buyer's
counsel under all applicable laws and the terms of the Company Employee
Plans to establish the Buyer, or an affiliate of the Buyer, as having all
rights and obligations with respect to the Company Employee Plans assumed
pursuant to this Agreement, including, without limitation, rights with
respect to all annuity or insurance contracts which form a part of any of
such Company Employee Plans, together with all other Company Employee Plan
assets. The Sellers shall obtain as of the Closing Date any and all
consents from trustees required to effect any transfer of any trust(s)
related to such assumed Company Employee Plans to such Trustee(s) as may be
appointed by the Buyer.
2.25 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth on SCHEDULE 2.25 attached hereto, since the
Current Balance Sheet Date, the Company has not entered into any
transaction that is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, the Company has not:
(i) incurred any material obligation or liability for borrowed
money;
(ii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than liabilities paid in the ordinary
course of business;
(iii) mortgaged, pledged or subjected to lien, charge or other
encumbrance any of their respective properties or assets;
(iv) sold or purchased, agreed to sell or purchase, assigned or
transferred any of its material, tangible assets or canceled any debts
or claims, except for inventory sold and raw materials purchased in
the ordinary course of business;
(v) made any material amendment to or termination of any Contract
or done any act or omitted to do any act which would cause the breach
of any Contract;
(vi) suffered any losses of personal or real property, whether
insured or uninsured, and whether or not in the control of the Company
in excess of $5,000 in the aggregate, or waived any rights of any
value;
(vii) authorized any declaration or payment of dividends by the
Company which is not wholly owned by the Company, or paid any such
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dividends, or authorized any transfer of assets of any kind whatsoever
by the Company to the Sellers with respect to any shares of capital
stock;
(viii) authorized or issued recall notices for any of its
products or initiated any safety investigations;
(ix) received notice of any litigation, warranty claim or
liability claim;
(x) made any material change in the terms, status or funding
condition of any Employee Plan, as defined in Section 2.24 hereof;
(xi) made, or committed to make, any changes in the compensation
payable to any officer, director, employee or agent of the Company, or
any bonus payment or similar arrangements made to or with any of such
officers, directors, employees or agents;
(xii) incurred any capital expenditure in excess of $2,500 in any
instance or $10,000 in the aggregate except in relation to and in
connection with the completion of the work in process in the clean
room at the Lenexa facility;
(xiii) made any material alteration in the manner of keeping the
books, accounts or records of the Company or in the accounting
practices therein reflected;
(xiv) suffered any material adverse change in the results of
operations, condition (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise), business or
prospects of the Company; or
(xv) made any payments or distributions to the Sellers, any
family member of the Sellers, or any entity controlled directly or
indirectly by any of the Sellers, including as a dividend, accrued
bonus, payment for outstanding shares or other rights in the Company,
or otherwise.
(b) Neither the Company nor the Sellers have knowledge of any existing
or threatened occurrence, event or development which, as far as can be
reasonably foreseen, could have a material adverse effect on the business,
properties, assets, condition (financial or otherwise) or prospects of the
Company.
2.26 CUSTOMERS. SCHEDULE 2.26 attached hereto sets forth a true, correct
and complete list of the names of each customer of the Company which accounted
for more than 10 percent of the revenues of the Company in the fiscal year ended
December 31, 1998 and for the nine months ended September 30, 1999. Except as
set forth on SCHEDULE 2.26, the Company has good customer relations and none of
the customers of the Company has notified the Company that it intends to
discontinue its relationship with the Company.
2.27 SUPPLIERS. SCHEDULE 2.27 attached hereto sets forth a true, correct
and complete list of (a) the names of each of the suppliers of the Company which
accounted for a dollar volume of purchases by the Company in excess of $25,000
for the fiscal year ended December
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31, 1998, and (b) the present sole source suppliers of significant goods or
services, other than utilities, for any product with respect to which practical
alternative sources of supply are not available on comparable terms and
conditions, indicating the contractual arrangements for continued supply from
each such supplier. Except as set forth on SCHEDULE 2.27, (i) the Company has
good relations with all of its suppliers, (ii) the Company is not more than 30
days in arrears in any trade accounts payable or other payments owing to any
supplier, and (iii) no sole source supplier has indicated an inability or
unwillingness to supply significant goods or services for any product for the
next twelve months.
2.28 WARRANTY AND PRODUCT LIABILITY CLAIMS. SCHEDULE 2.28 attached hereto
contains a true, correct and complete list of all warranty and liability claims
made against the Company from January 1, 1997 through the date hereof and other
than in the ordinary course of business and not material in amount, the current
status of all such claims and the costs of all actions taken in satisfaction of
such claims. All information relative to such claims and those arising
thereafter shall be available to the Buyer from and after the date hereof. To
the best knowledge of Sellers, there exist no claims pending or threatened
against the Company for injury to person, property, its employees or any third
party suffered as a result of the sale of any product or the performance of any
service by the Company, including, but not limited to, claims arising out of the
defective or unsafe nature of its products or services. To the best knowledge of
Sellers, the Company has full and adequate insurance coverage for potential
liability claims against it. The Buyer acknowledges that the Company will have
an obligation to honor warranty and liability claims made against the Company
after the Closing.
2.29 PREPAYMENTS AND DEPOSITS. SCHEDULE 2.29 attached hereto sets forth all
prepayments and deposits in excess of $5,000 received by the Company as of the
date hereof from customers for products to be shipped or services to be
performed after the Closing Date.
2.30 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND SELLERS. Except as
set forth on SCHEDULE 2.30 attached hereto, the Company is not indebted,
directly or indirectly, to any person who is an officer, director or Seller of
the Company or any affiliate of any such person in any amount whatsoever other
than for salaries for services rendered, accrued bonuses or reimbursable
business expenses, all of which have been reflected on the Current Financial
Statements, and no such officer, director, Seller or affiliate is indebted to
the Company except for advances made to employees of the Company in the ordinary
course of business to meet reimbursable business expenses anticipated to be
incurred by such obligor.
2.31 BANKING FACILITIES. SCHEDULE 2.31 attached hereto sets forth a true,
correct and complete list of:
(a) each bank, savings and loan or similar financial institution in
which the Company has an account or safety deposit box and the numbers of
the accounts or safety deposit boxes maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such account
or to have access to any such safety deposit box facility, together with a
description of the authority (and conditions thereof, if any) of each such
person with respect thereto.
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2.32 POWERS OF ATTORNEY AND SURETYSHIPS. Except as set forth on SCHEDULE
2.32 attached hereto, the Company does not have any general or special powers of
attorney outstanding (whether as grantor or grantee thereof) or has any
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, consignor, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
2.33 CONFLICTS OF INTEREST. Except as set forth on SCHEDULE 2.33 attached
hereto, no officer, director or any of the Sellers of the Company nor, to the
best knowledge of the Sellers, any affiliate of any such person, now has or
within the last three years had, either directly or indirectly:
(a) an equity or debt interest in any corporation, partnership, joint
venture, association, organization or other person or entity which
furnishes or sells, or during such period furnished or sold, services or
products to the Company, or purchases or during such period purchased from
the Company any goods or services, or otherwise does or during such period
did business with the Company; or
(b) a beneficial interest in any contract, commitment or agreement to
which the Company is or was a party or under which any of them is or was
obligated or bound or to which any of their respective properties may be or
may have been subject.
2.34 REGULATORY APPROVALS. All consents, approvals, authorizations or other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by the Company and which are necessary for the execution and delivery
by the Sellers and the Company of this Agreement or any documents to be executed
and delivered by the Sellers or the Company in connection herewith are set forth
on SCHEDULE 2.34 attached hereto and have been, or prior to the Closing Date
will be, obtained and satisfied.
2.35 OFFICERS AND DIRECTORS. SCHEDULE 2.35 attached hereto sets forth the
names of all of the officers and directors of the Company.
2.36 REAL ESTATE. SCHEDULE 2.36 attached hereto sets forth a legal
description of all real property owned by the Company or used in the conduct of
the Company's operations as of the Closing Date. All such owned properties are
free and clear of all Liens except for those Liens set forth in SCHEDULE 2.36
attached hereto. For the purposes of this paragraph, "Liens" shall mean any
lien, pledge, mortgage, security interest, lease, charge, option, right of first
refusal, easement, servitude, transfer restriction under any shareholder or
similar agreement, or any encumbrance.
2.37 DISCLOSURE. The information concerning the Company and the Sellers set
forth in this Agreement, the Exhibits and Schedules attached hereto and any
document, statement or certificate furnished or to be furnished to the Buyer
pursuant hereto, does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances in which they are made, not false and
misleading. The Sellers and the Company have disclosed to the Buyer all material
facts pertaining to the transactions
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contemplated by this Agreement and the Exhibits hereto. Copies of all documents
heretofore or hereafter delivered or made available to the Buyer pursuant to
this Agreement were or will be complete and accurate copies of such documents.
2.38 YEAR 2000 ISSUES. Except as set forth on SCHEDULE 2.38, all aspects of
the Company have been verified by the Company and the Sellers to be, and are,
Year 2000 Compliant. As used in this Section, "Year 2000 Compliant" shall mean
that any and all communications equipment, computer hardware (including but not
limited to mainframe computers, personal computers, servers, telephone systems
and related equipment), computer software, programming languages, code,
electronic applications and systems (including but not limited to LANs, WANs,
inter/intranet systems and client/server systems), programs, files, databases,
chips, microprocessors and any and all electronic or mechanical functionalities
in any way used in connection with, relied upon or relating to a specified
subject matter (E.G., a business, product or service) accurately and completely
process (in the manner intended, including but not limited to calculating,
comparing and sequencing) on a timely basis any and all data which are in any
way dependent upon usage of calendar dates, including but not limited to dates
on or after January 1, 2000, or time.
2.39 OMRON. Prior to Closing, any and all obligations of the Company
pursuant to the terms and conditions of a certain License Agreement between
Omron Corporation and Seller dated September 11, 1995 shall be paid in full.
2.40 KTEC. Prior to Closing, any and all obligations of the Company
pursuant to the terms and conditions of a certain Applied Research Matching Fund
Agreement between the Company and Kansas Technology Enterprise Corporation
("KTEC") dated September 27, 1994 shall be paid in full.
2.41 ADVANCED DISPLAY SYSTEMS, INC. Pursuant to the terms and conditions of
a certain License Agreement between the Company and Advanced Display Systems,
Inc. dated January 1, 1999, Gross Revenues (as such term is defined in such
agreement) as of the current date are zero. There are no obligations or royalty
payments due in accordance with the terms and conditions of such agreement,
until year 2000 at which time a minimum royalty payment is due.
3. REPRESENTATIONS OF THE BUYER
The Buyer represents and warrants to the Sellers as follows:
3.1 ORGANIZATION AND AUTHORITY. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Kansas, and
has all requisite power and authority (corporate or otherwise) to own its
properties and to carry on its business as now being conducted. The Buyer has
full corporate power to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby. Certified copies of the Article of Incorporation and the Bylaws of the
Buyer, as amended to date, are available to the Sellers, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date thereof.
3.2 CAPITALIZATION OF THE BUYER. On the date hereof, the Buyer's authorized
capital stock consists of 5,000,000 shares of common stock, $.01 par value, of
which 2,230,500 shares
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are issued and outstanding. All of the outstanding shares of capital stock of
the Buyer have been and on the Closing Date will be duly and validly issued and
are, or will be, fully paid and non-assessable.
3.3 AUTHORIZATION. The execution and delivery of this Agreement by the
Buyer, and the agreements to be executed by the Buyer hereunder and to be
delivered by the Buyer at Closing, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate action and shareholder approval (none of which actions or approvals
has been modified or rescinded and all of which actions and approval are in full
force and effect. This Agreement and all such other agreements and written
obligations entered into and undertaken in connection with the transactions
contemplated hereby constitute the valid and legally binding obligations of the
Buyer, enforceable against the Buyer in accordance with their respective terms.
The execution, delivery and performance of this Agreement and the agreements
provided for herein, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Buyer; (b) violate the provisions of the Buyer's
Articles of Incorporation or Bylaws; (c) violate any judgment, decree, order or
award of any court, governmental body or arbitrator; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Buyer pursuant
to, any indenture, mortgage, deed of trust or other agreement or instrument to
which the Buyer is a party or by which the Buyer is or may be bound. SCHEDULE
3.3 attached hereto sets forth a true, correct and complete list of all consent
and approvals of third parties that are required in connection with the
consummation by the Company of the transactions contemplated by this Agreement.
3.4 REGULATORY APPROVALS. All consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be obtained or
satisfied by the Buyer and which are necessary for the consummation of the
transactions contemplated by this Agreement have been, or will be prior to the
Closing Date, obtained and satisfied.
3.5 DISCLOSURE. No representation or warranty by the Buyer in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant hereto, contains or will contain any untrue statement of a
material fact.
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS
4.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS.
(a) From the date of this Agreement until the Closing Date, the
Sellers and the Company shall afford the officers, attorneys, accountants
and other authorized representatives of the Buyer free and full access upon
reasonable notice and during normal business hours to all management
personnel, offices, books and records of the Company so that the Buyer may
have full opportunity to make such investigation as it shall desire to make
of the management, and affairs of the Company, and the Buyer shall be
permitted to make abstracts from, or copies of, all such books and records.
The
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Sellers and the Company shall furnish to the Buyer such information as to
the Company as the Buyer shall reasonably request.
(b) If the Buyer, at its option and expense, elects within ten days
following the date hereof, to have a report or reports prepared by an
engineer or other professional selected by the Buyer, certifying that the
Real Estate (i) complies with all applicable federal, state and local
environmental and wetlands laws, rules and regulations and that there is
not now, and never has been, manufacture, storage, or disposal of hazardous
wastes at the Real Estate in violation of said laws, rules and regulations;
(ii) complies with all applicable building, health and fire codes, and
subdivision control laws, rules and regulations; and (iii) does not contain
any friable asbestos, the Sellers and the Company shall cooperate with such
engineer or professional to the extent necessary to prepare such reports,
including, without limitation, providing such engineer or professional
access to the Real Estate and necessary records, and arranging interviews
with employees of the Company.
(c) The Sellers and the Company shall authorize the release to the
Buyer of all files pertaining to the business or operations of the Company
held by any federal, state, county or local authorities, agencies or
instrumentalities. The Sellers' and the Company's authorization shall
specifically waive all previous claims of privilege or other restrictions,
and in any case where a release by a present or former employee of the
Company is necessary, the Sellers and the Company shall exercise their best
efforts to obtain such a release.
4.2 CONFIDENTIALITY.
(a) The existence and terms of the transaction contemplated hereby and
any information furnished by the Company, the Sellers or the Buyer to the
other party or parties in connection therewith ("Confidential Information")
shall be kept confidential by the receiving party and shall not be
disclosed to any third party except as set forth in subsection (b) below;
provided, however, that Confidential Information shall not include (i)
information known to the receiving party when received or (ii) information
that becomes generally available to the general public other than as a
result of a disclosure by the receiving party or parties or any of its or
their representatives in violation of this Agreement.
(b) Confidential Information may be disclosed (i) to the respective
directors, officers, employees, attorneys, accountants or financial
advisors of the receiving party or parties who need to know such
information for the purpose of consummating the transaction contemplated by
this Agreement (it being understood that such representatives of a
receiving party or parties shall be informed of the confidential nature of
such information and shall be directed to treat such information
confidentially and in accordance with this Agreement), (ii) with the
written consent of the disclosing party or parties, and (iii) as required
by law pursuant to the terms of a subpoena, order, civil investigative
demand, or similar process issued by a court of competent jurisdiction or
by any governmental or regulatory body or agency.
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(c) In the event that the transaction contemplated by this Agreement
is not consummated, each party agrees to return all physical manifestations
of the Confidential Information in its possession to the party or parties
furnishing such Confidential Information (including, to the extent
reasonably practicable, all copies, extracts, or other reproductions
thereof) and neither party or parties shall at any time thereafter,
directly or indirectly, disclose to third parties or use any Confidential
Information of the other party or parties.
4.3 PUBLIC ANNOUNCEMENTS. The parties agree that, prior to the Closing
Date, any and all general public pronouncements, other general public
communications, and internal communications to the Company's employees, in each
case concerning this Agreement and the purchase and sale of the Company Shares
by the Buyer, and the timing, manner and content of such disclosures, shall be
subject to the mutual agreement of the Company and the Buyer; provided, however,
that the Buyer, without prior consultation with the Sellers or the Company,
shall be entitled to file any and all public documents and make any and all
public disclosures as may be required of it under applicable securities laws.
5. PRE-CLOSING COVENANTS OF THE PARTIES
5.1 CONDUCT OF BUSINESS. From and after the date hereof and until the
Closing Date, except as otherwise contemplated by this Agreement, until the
Closing, the Sellers shall cause the Company to operate and carry on its
business only in the ordinary course consistent with past practices, and,
without limiting the generality of the foregoing, pending the Closing:
(a) PRESERVATION OF BUSINESS. The Sellers shall cause the Company to
use its best efforts to preserve the properties, assets and goodwill of its
business.
5.2 ABSENCE OF MATERIAL CHANGES. Without limiting the generality of the
covenants in Section 5.1, and without the prior written consent of the Buyer,
the Company shall not:
(a) take any action to amend its charter documents or bylaws;
(b) issue any stock, bonds or other corporate securities or grant any
option or issue any warrant to purchase or subscribe for any of such
securities or issue any securities convertible into such securities;
(c) incur any obligation or liability (absolute or contingent), except
current liabilities incurred and obligations under contracts entered into
in the ordinary course of business;
(d) declare or make any payment or distribution to the Sellers with
respect to its stock or purchase or redeem any shares of its capital stock;
(e) mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of their respective assets or properties;
(f) sell, assign, or transfer any of its assets, except for (i)
inventory sold in the ordinary course of business, at a normal profit
margin, and for not less than replacement
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cost and (ii) the LCD manufacturing facility located at 14812 W. 117th
Street, Olathe, Kansas 66062;
(g) cancel any debts or claims, except in the ordinary course of
business;
(h) merge or consolidate with or into any corporation or other entity;
(i) make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to any
of its officers, directors or employees, other than increases in the
ordinary course of business consistent with past practice;
(j) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
(k) waive any rights of material value;
(l) modify, amend, alter or terminate any of its executory contracts
of a material value or which are material in amount;
(m) take or permit any act or omission constituting a breach or
default under any contract, indenture or agreement by which it or its
properties are bound;
(n) fail to (i) preserve the possession and control of its assets and
business, (ii) keep in faithful service its present officers and key
employees, (iii) preserve the goodwill of its consumers, suppliers, agents,
brokers and others having business relations with it, and (iv) keep and
preserve its business existing on the date hereof until the Closing Date;
(o) fail to operate its business and maintain its books, accounts and
records in the customary manner and in the ordinary and regular course of
business and maintain in good repair its business premises, fixtures,
machinery, furniture and equipment;
(p) enter into any lease, contract, agreement or understanding;
(q) incur any capital expenditure in excess of $5,000 in any instance
or $20,000 in the aggregate except for those expenses related to and in
connection with the completion of the work in process in the clean room at
the Lenexa facility;
(r) engage any new management level employee;
(s) materially alter the terms, status or funding condition of any
Employee Plan;
(t) commit or agree to do any of the foregoing in the future; or
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(u) except as set forth on SCHEDULE 5.2 attached hereto, make any
payments or distributions to the Sellers, any family member of any of the
Sellers, or any entity controlled directly or indirectly by any of the
Sellers.
5.3 COMMUNICATIONS WITH CUSTOMERS, SUPPLIERS AND EMPLOYEES.
(a) Unless instructed otherwise by the Buyer in writing, the Company
will continue to accept customer orders and enter into agreements to
provide services in the ordinary course of business and consistent with
past practice for all products and services offered by the Company but
expected to be shipped or rendered, as the case may be, after the Closing
Date.
(b) The Company and the Buyer will cooperate in communications with
suppliers, customers and employees concerning the transfer of the Company
Shares to the Buyer on the Closing Date.
5.4 COMPLIANCE WITH LAWS. The Company will comply with all laws and
regulations applicable to it or to the conduct of its business and will perform
and comply with all contracts, commitments and obligations by which they are
bound.
5.5 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES. Neither the Sellers
nor the Company will take any actions that may result in any of the
representations or warranties set forth in Sections 2 hereof being untrue.
5.6 CONTINUING OBLIGATION TO INFORM. From time to time prior to the
Closing, the Sellers will deliver or cause to be delivered to the Buyer
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement or any
information contained in any Schedule attached hereto inaccurate or incomplete
in any material respect at any time after the date hereof until the Closing
Date; PROVIDED, that none of such supplemental information shall constitute an
amendment of any statement, representation or warranty in this Agreement or any
Schedule, Exhibit or document furnished pursuant hereto.
5.7 EXCLUSIVE DEALING. Neither the Sellers nor the Company will, directly
or indirectly, through any officer, director, agent or otherwise, (a) solicit,
initiate or encourage submission of proposals or offers from any person relating
to an acquisition or purchase of all or a material portion of the assets of or
an equity interest in the Company or any merger, consolidation or business
combination with the Company, or (b) participate in any discussions or
negotiations regarding, or furnish to any other person, any non-public
information with respect to or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Sellers and the Company agree to
promptly notify the Buyer of any such proposal or offer, or any inquiry or
contact with respect thereto received by the Company or the Sellers.
5.8 REPORTS, TAXES. The Company will duly and timely file all reports or
returns required to be filed with federal, state, local and foreign authorities
and will promptly pay all federal, state, local and foreign taxes, assessments
and governmental charges levied or assessed
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upon them or any of its properties (unless contesting such in good faith and
adequate provision has been made therefor).
5.9 NO SECURITIES TRADING. Sellers acknowledges that Buyer is a publicly
held company and that either (i) the improper dissemination of information
concerning this Agreement and the transactions contemplated herein, or (ii) the
trading in ASII Common Stock by any party to the Agreement or by any party
receiving information concerning the Agreement or the transactions contemplated
herein from any party to this Agreement prior to the proper public release or
announcement of the Agreement could result in a violation of the Securities
Exchange Commission's insider trading regulations. Sellers agree to refrain from
disseminating such information or engaging in such trading without the prior
written consent of Buyer.
5.10 ACKNOWLEDGMENT OF RELATED DOCUMENTS.
(a) The Sellers acknowledge and agree, in their individual capacity,
that they shall, simultaneously with the execution of this Agreement, cause
KHC of Lenexa, L.L.C. (a Kansas limited liability company wholly owned by
the Sellers) ("KHC"), to execute a certain Asset Purchase Agreement by and
between Company and KHC to be dated as of the Closing Date (the "Asset
Purchase Agreement");
(b) The parties acknowledge that the transactions contemplated by the
Asset Purchase Agreement are vital to this Agreement and to the continued
performance of the business activities and operations of Buyer; and
(c) ASII, pursuant to the transaction contemplated herein, shall
acquire 100% of the outstanding and issued shares of stock of the Company
and ASII shall cause the Company to promptly execute the Asset Purchase
Agreement immediately following the execution of this Agreement. The
parties anticipate closing the Asset Purchase Agreement on the Closing
Date.
6. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS
6.1 BEST EFFORTS. The Sellers, the Company and the Buyer covenant and agree
to use their best efforts to obtain the satisfaction of the conditions to
Closing specified in this Agreement.
6.2 FURTHER ASSURANCES. The Buyer and the Sellers shall each cooperate with
each other, and execute and deliver, or cause to be executed and delivered, all
such other instruments, including instruments of conveyance, assignment and
transfer, and take all such other actions as another party may reasonably be
requested to take by the other party from time to time, consistent with the
terms of this Agreement in order to effectuate the provisions and purposes of
this Agreement.
7. CONDITIONS TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
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7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
THE COMPANY; COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and
warranties of the Sellers shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date (even
though they purport to have been given on a date prior to the Closing Date),
except for any changes permitted by the terms hereof or consented to in writing
by the Buyer. The Sellers and the Company shall have performed and complied with
all terms, conditions, covenants, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by each of them
prior to or at the Closing Date.
7.2 PERFORMANCE BY THE SELLERS AND THE COMPANY. The Sellers shall have
tendered to the Buyer certificates transferring all of the Company Shares duly
endorsed or accompanied by duly executed stock powers (in blank) and with any
required transfer stamps affixed.
7.3 GOVERNMENTAL APPROVALS. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Sellers or the Company of the transactions contemplated
by this Agreement and the operation of the business of the Company by the Buyer
shall have consented to, authorized, permitted or approved such transactions.
7.4 CONSENT OF LENDERS, LESSORS AND OTHER THIRD PARTIES. The Sellers and
the Company shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the Sellers and
the Company to consummate the transactions contemplated by this Agreement,
including without limitation, those set forth on SCHEDULE 2.8 attached hereto.
7.5 BOARD OF DIRECTORS AND SHAREHOLDER APPROVAL. The Board of Directors and
the shareholders (if necessary) of the Buyer shall have duly authorized the
transactions contemplated by this Agreement.
7.6 ADVERSE PROCEEDINGS. No action or proceeding by or before any court,
administrative agency or other governmental body shall have been instituted or
threatened by any governmental body or person whatsoever which shall seek to
restrain, prohibit or invalidate the transactions contemplated by this Agreement
or which might affect the right of the Buyer to own the Company Shares or to own
or operate the business of the Company after the Closing.
7.7 OPINION OF COUNSEL. The Buyer shall have received an opinion of counsel
to the Sellers and the Company dated as of the Closing Date, in substantially
the form attached hereto as Exhibit A, and as to such other matters as may be
reasonably requested by the Buyer or its counsel.
7.8 UPDATE. The Company and the Sellers shall have provided the Buyer with
a true, correct and complete list and amount, as of the last business day
immediately preceding the Closing Date, of:
(a) the Personal Property;
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(b) the Real Property Leases;
(c) the Inventory;
(d) the Accounts Receivable, including an aging thereof;
(e) the Contracts;
(f) trade accounts payable and accrued liabilities;
(g) unfilled customer orders;
(h) all shipments made during the period from the date of this
Agreement to the Closing Date; and
(i) long-term and short-term debt.
None of the information with respect to the items referred to in clauses (a)
through (h) above shall be materially adverse from the information supplied by
the Sellers as of the date hereof and, with respect to clause (i) above, none of
such information shall reflect greater debt than is set forth in the Current
Balance Sheet. For purposes of this Section 7.8, the term "materially adverse"
shall mean any change, other than those specifically contemplated by or
permitted pursuant to the terms of this Agreement, having an economic value in
excess of $2,500.
7.9 DUE DILIGENCE. The Buyer shall have been satisfied, in its sole and
reasonable opinion, with the results of its investigation of the Company and the
Sellers. Buyer's due diligence shall in no way limit Sellers' representations,
warranties and agreements contained in this Agreement.
7.10 NONCOMPETITION AGREEMENT. Mr. Cook shall have executed and delivered
to Buyer a noncompetition agreement, substantially in the form attached hereto
as Exhibit B (the "Noncompetition Agreement").
7.11 EMPLOYMENT AGREEMENTS. Mr. Hammond and Mr. Klusman shall have executed
and delivered to Buyer employment agreements, substantially in the form attached
hereto as Exhibit C (the "Employment Agreements").
7.12 EMPLOYMENT AGREEMENT OF LARRY SHELTON. Mr. Shelton shall have executed
and delivered to Buyer an employment agreement, as agreed to by Mr. Shelton and
Buyer, and on no less favorable economic terms to Mr. Shelton than he currently
enjoys.
7.13 FINANCING. Buyer shall have obtained financing on satisfactory terms
and conditions to cover the obligations under Section 1.2.
7.14 REGISTRATION. At Closing, the Sellers shall have executed and
delivered a Registration Rights Agreement, substantially in the form attached
hereto as Exhibit D (the "Registration Agreement").
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7.15 COMPANY AND SELLERS' APPROVAL. The Company expressly waives its rights
to purchase the stock of the Sellers and all other rights set forth in Section
26 of the Company's bylaws. Each of the Sellers hereby expressly consents to the
sale of the Company Shares by both of the other Sellers.
7.16 CLOSING DELIVERIES. The Buyer shall have received at or prior to the
Closing such documents, instruments or certificates as the Buyer may reasonably
request including, without limitation:
(a) the stock certificates representing the Company Shares duly
endorsed in accordance with Section 1.1 of this Agreement;
(b) such certificates of the Company's officers and of the Sellers and
such other documents evidencing satisfaction of the conditions specified in
this Section 7 as the Buyer shall reasonably request;
(c) certificates of the Secretary of State of the State of Kansas as
to the legal existence and good standing (including tax) of the Company in
Kansas;
(d) a cross receipt executed by the Buyer and the Sellers;
(e) such documents as are necessary to transfer to the Buyer control
over all banking accounts and safety deposit boxes of the Company;
(f) all blank stock certificates and the original stock transfer
records, the minute book and the seal of the Company, all other books,
records, surveys, data, documents, files and other information including
books of account related to the operation of the Company's business, or its
properties or assets and hard copies of any books or records or other
documents or information relating to the operation of the Company's
business or its properties or assets stored on any electronic media,
including computers;
(g) valid and binding resignations of all officers and directors of
the Company as of the Closing Date;
(h) duly executed Noncompetition Agreement;
(i) duly executed Employment Agreements from Mr. Hammond, Mr. Klusman
and Mr. Shelton; and
(j) duly executed Registration Agreement.
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Sellers.
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8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS. The representations and warranties of
the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Sellers. The Buyer shall
have performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 CORPORATE PROCEEDINGS. All corporate and other proceedings required to
be taken on the part of the Buyer to authorize or carry out this Agreement shall
have been taken.
8.3 GOVERNMENTAL APPROVALS. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.
8.4 ADVERSE PROCEEDINGS. No action or proceeding by or before any court or
other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Sellers to transfer the Company Shares.
8.5 CLOSING DELIVERIES. The Sellers shall have received at or prior to the
Closing such documents, instruments or certificates as the Sellers may
reasonably request including, without limitation:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as
the Sellers shall reasonably request;
(b) payment of the Purchase Price, including a duly executed stock
certificate or certificates for the number of shares of ASII Common Stock
specified in Section 1.2 hereof;
(c) duly executed Noncompetition Agreements;
(d) duly executed Employment Agreements;
(e) duly executed Registration Agreement;
(f) a cross receipt executed by the Buyer and the Sellers; and
(g) a release from all lenders to the Company releasing the Sellers
from any and all personal liability they may have related to loans made to
the Company.
9. INDEMNIFICATION
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9.1 BY THE SELLERS AND THE COMPANY. If the Closing occurs, the Sellers and
the Company hereby indemnify and hold harmless the Buyer, from and against all
claims, damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions) (collectively, the
"Losses") in connection with each and all of the following:
(a) any material misrepresentation or breach of any representation or
warranty made by the Sellers and the Company in this Agreement;
(b) any material breach of any covenant, agreement or obligation of
the Sellers and the Company contained in this Agreement or any other
agreement, instrument or document contemplated by this Agreement;
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by the Sellers and the Company pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement; and
(d) any claim relating to the Company's business or operation prior to
the Closing Date, other than any warranty or other claim relating to a
product manufactured or sold by the Company prior to the Closing Date.
9.2 BY THE BUYER. If the Closing occurs, the Buyer hereby indemnifies and
holds harmless the Sellers and the Company, from and against all claims,
damages, losses, liabilities, costs and expenses (including, without limitation,
settlement costs and any legal, accounting or other expenses for investigating
or defending any actions or threatened actions) (collectively, the "Losses") in
connection with each and all of the following:
(a) any misrepresentation or breach of any representation or warranty
made by the Buyer in this Agreement;
(b) any breach of any covenant, agreement or obligation of the Sellers
contained in this Agreement or any other agreement, instrument or document
contemplated by this Agreement;
(c) any misrepresentation contained in any statement, certificate or
schedule furnished by the Buyer pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement; and
(d) any claim relating to (i) products manufactured or sold by the
Company after the Closing Date or (ii) the Company's business or operation
after the Closing Date.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification under this Section 9, the Buyer, the Sellers or the Company, as
the case may be, seeking indemnification (the "Indemnified Party"), shall
promptly notify the other party (the "Indemnifying Party") the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. The
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Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party; provided, however, that if suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 9.3 of
this Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving notice to the Indemnification Party as
provided in Section 9.3.
9.4 DEFENSE BY THE INDEMNIFYING PARTY. In connection with any claim which
may give rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person other than the Indemnifying Party, at the sole
cost and expense of the Indemnifying Party, may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
the Indemnifying Party acknowledges to the Indemnified Party in writing the
obligation of the Indemnifying Party to indemnify the Indemnified Party with
respect to all elements of such claim. If the Indemnifying Party assume the
defense of any such claim or legal proceeding, the Indemnifying Party shall
select counsel reasonably acceptable to the Indemnified Party to conduct the
defense of such claims or legal proceedings and at the sole cost and expense of
the Indemnifying Party shall take all steps necessary in the defense or
settlement thereof. The Indemnified Party shall thereafter be entitled to
participate in and assume control of the defense of any such action if the
Indemnified Party has a reasonable basis for concluding that its interests would
be better served. The Indemnifying Party shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed). The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party do not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date such claim is made: (a) the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. If the Indemnifying Party or the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such third party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third party
claim in a reasonably prudent manner.
9.5 PAYMENT OF INDEMNIFICATION OBLIGATION. All indemnification by the
Buyer, Sellers or the Company hereunder, as the case may be (to the extent not
satisfied in the manner specified in the preceding sentence), and any
indemnification by the Sellers, Buyer or the Company, as the case may be, if the
Closing does not occur, shall be effected by payment of cash or delivery of a
cashier's or certified check in the amount of the indemnification liability.
Buyer shall, in addition to other remedies then available to it, have the right
to offset the amount of such indemnification claim against payments due from
Buyer to Seller. Buyer shall only be entitled to receive payment for Losses for
which it is otherwise entitled to be compensated under this Section 9 to the
extent such Losses in the aggregate exceed $25,000 (the "Basket Amount"). If
such Losses in the aggregate exceed the Basket Amount, Buyer shall be entitled
to payment of all losses pursuant to this Section 9 that are in excess of the
Basket Amount.
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9.6 SURVIVAL OF REPRESENTATIONS. All representations and warranties made by
the Sellers and the Company in this Agreement, or in any instrument or document
furnished in connection with this Agreement or the transactions contemplated
hereby, excluding those listed below, shall survive the Closing and any
investigation at any time made by or on behalf of the Indemnified Party for a
period of eighteen months. The representations and warranties provided in
Section 2.18 shall survive the Closing and any investigation at any time made by
or on behalf of the Indemnified Party for a period of three (3) years. The
representations and warranties provided in Section 2.22 shall survive the
Closing and any investigation at any time made by or on behalf of the
Indemnified Party for a period of five (5) years.
10. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES
10.1 TERMINATION BY LAPSE OF TIME. This Agreement shall terminate at 5:00
p.m., local time, on January 31, 2000, if the transactions contemplated hereby
have not been consummated, unless such date is extended by the written consent
of the Company, the Buyer and the Sellers.
10.2 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In the event
of such termination by agreement, the Buyer shall have no further obligation or
liability to the Sellers under this Agreement, and the Sellers shall have no
further obligation or liability to the Buyer under this Agreement.
10.3 TERMINATION BY REASON OF BREACH. This Agreement may be terminated by
the Sellers if at any time prior to the Closing there shall occur a material
breach of any of the representations, warranties or covenants of the Buyer or
the failure by the Buyer to perform any condition or obligation hereunder, and
may be terminated by the Buyer, if at any time prior to the Closing there shall
occur a material breach of any of the representations, warranties or covenants
of the Sellers, the Company or the failure of the Sellers, or the Company to
perform any condition or obligation hereunder.
10.4 AVAILABILITY OF REMEDIES AT LAW. In the event this Agreement is
terminated by the Buyer or the Sellers, pursuant to the provisions of this
Section 10, the parties hereto shall have available to them all remedies
afforded to them by applicable law.
11. NOTICES
Any notices or other communications required or permitted hereunder shall
be sufficiently given if delivered personally or sent by federal express,
registered or certified mail, facsimile, postage prepaid, addressed as follows
or to such other address of which the parties may have given notice:
34
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To the Buyer:
Airport Systems International, Inc.
11300 W. 89th Street
Overland Park, Kansas 66214
Facsimile No.: (913) 492-0870
Attention: Thomas C. Cargin
Vice President and Chief Financial Officer
With a copy to:
Blackwell Sanders Peper Martin LLP
Two Pershing Square, Suite 1000
2300 Main Street
P.O. Box 419777
Kansas City, Missouri 64141-6777
Facsimile No.: (816) 983-8080
Attention: Steven F. Carman
To the Sellers:
Mr. Chris Hammond
15301 W. 109th Street
Lenexa, Kansas 66219
Facsimile No.: (913) 982-5766
With a copy to:
Mr. James R. Hubbard
Norton, Hubbard, Ruzicka & Kramer L.C.
130 North Cherry
Olathe, Kansas 66051
Facsimile No.: (913) 782-2012
Unless otherwise specified herein, such notices or other communications shall be
deemed (a) received on the date delivered, if delivered personally, (b)
effective upon confirmation of transmission, if by facsimile, or (c) received
three business days after being sent, if sent by registered or certified mail.
35
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12. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Sellers and the Company on the other hand, may
not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that Buyer may assign this
Agreement and its rights and interests hereto to a financial lending institution
without the prior consent of the Sellers or the Company. Any assignment in
contravention of this provision shall be void. No assignment shall release the
Buyer, the Sellers, or the Company from any obligation or liability under this
Agreement.
13. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments and
understandings between such parties. The Buyer, by the consent of its Board
of Directors or officers authorized by such Board, and the Sellers may
amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and such majority of the Sellers.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to
be attached hereafter are hereby incorporated as integral parts of this
Agreement.
14. SEVERABILITY
Any provision of this Agreement which is invalid, illegal or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement invalid, illegal or unenforceable in any other
jurisdiction.
15. EXPENSES
Except as otherwise expressly provided herein, the Buyer, on the one hand,
and the Sellers on the other hand, will pay all fees and expenses (including,
without limitation, legal and accounting fees and expenses) incurred by them in
connection with the transactions contemplated hereby. In no event will any of
the fees or expenses incurred in connection with this transaction by the Sellers
including, without limitation, the fees and expenses of counsel to the Sellers,
be billed to or paid by the Company. The Sellers shall be responsible for
payment of all sales or transfer taxes arising out of the conveyance of the
Company Shares owned by the Sellers.
16. HEALTH INSURANCE
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For a period of six years following the Closing Date, Buyer shall use
commercially reasonable efforts to make available to William D. Cook, at Mr.
Cook's expense, the family group medical insurance coverage generally available
from time to time to the employees of the Company.
17. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Kansas.
18. SECTION HEADINGS
The section headings are for the convenience of the parties and in no way
alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
19. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the same
document.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
DCI, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
37
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SELLERS
________________________________
Chris I. Hammond
________________________________
William D. Cook
________________________________
Larry C. Klusman
38
<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
DCI, INC.,
CHRIS HAMMOND, WILLIAM COOK, LARRY KLUSMAN
AND
AIRPORT SYSTEMS INTERNATIONAL, INC.
<PAGE>
TABLE OF CONTENTS
1. PURCHASE AND SALE OF THE COMPANY SHARES AND INTANGIBLE ASSETS.............1
1.1 PURCHASE OF THE COMPANY SHARES AND INTANGIBLE ASSETS FROM THE
SELLERS...................................................................1
1.2 PURCHASE PRICE FOR THE COMPANY SHARES AND INTANGIBLE ASSETS...........2
1.3 CLOSING...............................................................2
1.4 ALLOCATION OF PURCHASE PRICE..........................................2
1.5 DELIVERY OF SHARES....................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EACH OF THE SELLERS.....3
2.1 TITLE TO SHARES.......................................................3
2.2 AUTHORITY.............................................................3
2.3 EXECUTION AND DELIVERY................................................3
2.4 BROKERS...............................................................3
2.5 CAPITALIZATION OF THE COMPANY.........................................3
2.6 ORGANIZATION AND STATUS OF THE COMPANY................................3
2.7 NO SUBSIDIARIES OR AFFILIATED ENTITIES................................4
2.8 AUTHORIZATION.........................................................4
2.9 FINANCIAL STATEMENTS..................................................4
2.10 ABSENCE OF UNDISCLOSED LIABILITIES...................................5
2.11 LITIGATION...........................................................5
2.12 INSURANCE............................................................5
2.13 PERSONAL PROPERTY....................................................6
2.14 INTANGIBLE PROPERTY..................................................7
2.15 LEASES...............................................................8
2.16 INVENTORY............................................................8
2.17 ACCOUNTS RECEIVABLE..................................................8
2.18 TAX MATTERS..........................................................9
2.19 BOOKS AND RECORDS...................................................10
2.20 CONTRACTS AND COMMITMENTS...........................................10
2.21 COMPLIANCE WITH AGREEMENTS AND LAWS.................................12
2.22 ENVIRONMENTAL.......................................................12
<PAGE>
2.23 EMPLOYEE RELATIONS..................................................13
2.24 EMPLOYEE BENEFIT PLANS..............................................14
2.25 ABSENCE OF CERTAIN CHANGES OR EVENTS................................17
2.26 CUSTOMERS...........................................................19
2.27 SUPPLIERS...........................................................19
2.28 WARRANTY AND PRODUCT LIABILITY CLAIMS...............................19
2.29 PREPAYMENTS AND DEPOSITS............................................19
2.30 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND SELLERS............20
2.31 BANKING FACILITIES..................................................20
2.32 POWERS OF ATTORNEY AND SURETYSHIPS..................................20
2.33 CONFLICTS OF INTEREST...............................................20
2.34 REGULATORY APPROVALS................................................20
2.35 OFFICERS AND DIRECTORS..............................................21
2.36 REAL ESTATE.........................................................21
2.37 DISCLOSURE..........................................................21
2.38 YEAR 2000 ISSUES....................................................21
2.39 OMRON...............................................................21
2.40 KTEC................................................................21
2.41 ADVANCED DISPLAY SYSTEMS, INC.......................................22
3. REPRESENTATIONS OF THE BUYER.............................................22
3.1 ORGANIZATION AND AUTHORITY...........................................22
3.2 CAPITALIZATION OF THE BUYER..........................................22
3.3 AUTHORIZATION........................................................22
3.4 REGULATORY APPROVALS.................................................23
3.5 DISCLOSURE...........................................................23
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS..............................23
4.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS.........................23
4.2 CONFIDENTIALITY......................................................24
4.3 PUBLIC ANNOUNCEMENTS.................................................24
5. PRE-CLOSING COVENANTS OF THE PARTIES AND THE COMPANY.....................25
5.1 CONDUCT OF BUSINESS..................................................25
<PAGE>
5.2 ABSENCE OF MATERIAL CHANGES..........................................25
5.3 COMMUNICATIONS WITH CUSTOMERS, SUPPLIERS AND EMPLOYEES...............26
5.4 COMPLIANCE WITH LAWS.................................................27
5.5 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES....................27
5.6 CONTINUING OBLIGATION TO INFORM......................................27
5.7 EXCLUSIVE DEALING....................................................27
5.8 REPORTS, TAXES.......................................................27
5.9 NO SECURITIES TRADING................................................27
5.10 ACKNOWLEDGMENT OF RELATED DOCUMENTS.................................28
6. BEST EFFORTS TO OBTAIN SATISFACTION OF CONDITIONS........................28
6.1 BEST EFFORTS.........................................................28
6.2 FURTHER ASSURANCES...................................................28
7. CONDITIONS TO OBLIGATIONS OF THE BUYER...................................28
7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE COMPANY; COMPLIANCE WITH COVENANTS AND OBLIGATIONS...............28
7.2 PERFORMANCE BY THE SELLERS AND THE COMPANY...........................29
7.3 GOVERNMENTAL APPROVALS...............................................29
7.4 CONSENT OF LENDERS, LESSORS AND OTHER THIRD PARTIES..................29
7.5 BOARD OF DIRECTORS AND SHAREHOLDER APPROVAL..........................29
7.6 ADVERSE PROCEEDINGS..................................................29
7.7 OPINION OF COUNSEL...................................................29
7.8 UPDATE...............................................................29
7.9 DUE DILIGENCE........................................................30
7.10 NONCOMPETITION AGREEMENTS...........................................30
7.11 EMPLOYMENT AGREEMENTS...............................................30
7.12 EMPLOYMENT AGREEMENT OF LARRY SHELTON...............................30
7.13 FINANCING...........................................................30
7.14 Registration...........................................................30
7.15 COMPANY AND SELLERS' APPROVAL.......................................31
7.16 CLOSING DELIVERIES..................................................31
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS.................................31
<PAGE>
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE BUYER;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS................................32
8.2 CORPORATE PROCEEDINGS................................................32
8.3 GOVERNMENTAL APPROVALS...............................................32
8.4 ADVERSE PROCEEDINGS..................................................32
8.5 CLOSING DELIVERIES...................................................32
9. INDEMNIFICATION..........................................................33
9.1 BY THE SELLERS AND THE COMPANY.......................................33
9.2 BY THE BUYER.........................................................33
9.3 CLAIMS FOR INDEMNIFICATION...........................................33
9.4 DEFENSE BY THE INDEMNIFYING PARTY....................................34
9.5 PAYMENT OF INDEMNIFICATION OBLIGATION................................34
9.6 SURVIVAL OF REPRESENTATIONS..........................................35
10. TERMINATION OF AGREEMENT; OPTION TO PROCEED; DAMAGES....................35
10.1 TERMINATION BY LAPSE OF TIME........................................35
10.2 TERMINATION BY AGREEMENT OF THE PARTIES.............................35
10.3 TERMINATION BY REASON OF BREACH.....................................35
10.4 AVAILABILITY OF REMEDIES AT LAW.....................................35
11. NOTICES.................................................................35
12. SUCCESSORS AND ASSIGNS..................................................37
13. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS...............................37
14. SEVERABILITY............................................................37
15. EXPENSES................................................................37
16. HEALTH INSURANCE........................................................38
17. GOVERNING LAW...........................................................38
18. SECTION HEADINGS........................................................38
19. COUNTERPARTS............................................................38
<PAGE>
Schedules to be provided by the Sellers and the Company:
Schedule 2.5 - Capitalization of the Company
Schedule 2.7 - Affiliated Entities
Schedule 2.10 - Undisclosed Liabilities
Schedule 2.11 - Litigation
Schedule 2.12 - Insurance
Schedule 2.13 - Personal Property
Schedule 2.14 - Intangible Property
Schedule 2.15 - Leases
Schedule 2.16 - Inventory
Schedule 2.17 - Accounts Receivable
Schedule 2.18 - Tax matters
Schedule 2.20 - Contracts
Schedule 2.23 - Employee Relations
Schedule 2.24 - Company Employee Plans
Schedule 2.25 - Certain Changes and Events
Schedule 2.26 - Customer List
Schedule 2.27 - Suppliers
Schedule 2.28 - Warranty and Product Liability Claims
Schedule 2.29 - Prepayments and Deposits
Schedule 2.30 - Affiliated Indebtedness
Schedule 2.31 - Banking Facilities
Schedule 2.32 - Powers of Attorney and Suretyships
Schedule 2.33 - Conflicts of Interest
Schedule 2.34 - Regulatory Approvals
Schedule to be provided by the Buyer:
Schedule 7.11 - Employment Agreements
<PAGE>
Exhibits
A - Opinion of Sellers' Counsel
B - Noncompetition Agreement
C - Employment Agreements
D - Registration Rights Agreement
<PAGE>
INDEX OF CERTAIN DEFINED TERMS
The terms set forth below shall have the meanings ascribed thereto in the
referenced sections:
<PAGE>
Accounts Receivable Section 2.17
Affiliates Section 2.20
Balance Sheet Date Section 2.20
Closing Section 1.1
Closing Date Section 1.3
Code Section 2.18
Contracts Section 2.20
Current Balance Sheet Section 2.9
Current Financial Statements Section 2.9
Defined Benefit Plans Section 2.24
Company Employee Plans Section 2.24
ERISA Section 2.24
Financial Statements Section 2.9
Insurance Policies Section 2.12
Intangible Property Section 2.14
Inventory Section 2.16
Leases Section 2.15
1997 Balance Sheet Section 2.9
Personal Property Section 2.13
Purchase Price Section 1.2
Real Estate Section 2.36
Shares Section 1.1
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT, dated as of February 7, 2000, is entered into
by and between KCEP VENTURES II, L.P., a Kansas limited partnership
("Purchaser"), and AIRPORT SYSTEMS INTERNATIONAL, INC., a Kansas corporation
("Company").
RECITALS
A. Company is in the business of developing, manufacturing and
marketing navigational aids, and is entering the business of electronic
contract manufacturing and acquiring related entities.
B. Immediately prior to the consummation of the transactions contemplated
herein, the Company will consummate the transactions contemplated by that
certain Stock Purchase Agreement by and among the Company, DCI, Inc. ("DCI"),
Chris I. Hammond, Larry C. Klusman and William D. Cook in which DCI will become
a wholly-owned subsidiary of the Company (the "Stock Purchase Agreement"),
followed by consummation of the transactions contemplated by that certain Asset
Purchase Agreement by and among DCI, KHC of Lenexa, L.L.C. ("KHC"), Hammond,
Klusman and Cook (the "Asset Purchase Agreement"). The purchases under both the
Stock Purchase Agreement and Asset Purchase Agreement shall be financed by Bank
of America, N.A. ("BOA"), which financing shall be evidenced by a Loan and
Security Agreement by and among the Company, DCI and BOA (the "Loan Agreement")
and the Assignment and Assumption among DCI, BOA, KHC, UMB Bank, N.A., and the
City of Lenexa (the "Assignment Agreement"). The Stock Purchase Agreement, the
Asset Purchase Agreement, the Loan Agreement and the Assignment Agreement and
any and all documents contemplated therein to be executed and delivered shall be
collectively referred to as the "Transaction Documents."
C. Purchaser desires to invest in Company pursuant to the terms and
conditions of this Agreement.
AGREEMENT
In consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. AUTHORIZATION AND SALE OF COMMON STOCK, DEBENTURE AND WARRANT.
1.1 AUTHORIZATION. Company has, or on or before the Closing (as
defined in Section 2 below) will have, duly authorized and reserved for issuance
as described below:
(a) COMMON STOCK. Up to 410,715 shares of its voting
common stock, $.01 par value (the "Common Stock"), having the rights,
restrictions, privileges, and preferences set forth in the Articles of
Incorporation of the Company, as amended (the "Articles of Incorporation");
<PAGE>
(b) CONVERTIBLE SUBORDINATED DEBENTURE. A convertible
subordinated debenture (the "Convertible Subordinated Debenture") in an
amount of $500,000, with a conversion price of $3.00 per share (the
"Debenture Price"), in substantially the form attached hereto as Exhibit A;
and
(c) WARRANT. A warrant (the "Warrant") granting Purchaser the
right to purchase 45,635 shares of Common Stock for $150,595.50 (or $3.30 per
share) (the "Warrant Price"), in substantially the form attached hereto as
Exhibit B.
1.2 SALE OF THE COMMON STOCK. Subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 2 below) Company will sell
and issue to Purchaser, and Purchaser will acquire, 198,413 shares of Common
Stock for $500,000 (or $2.52 per share) (the "Common Stock Purchase Price").
1.3 SALE OF CONVERTIBLE SUBORDINATED DEBENTURE. Subject to the terms
and conditions of this Agreement, at the Closing (as defined in Section 2 below)
Company will sell and issue to Purchaser, and Purchaser will acquire, the
Convertible Subordinated Debenture in the amount of $500,000.
1.4 SALE OF WARRANT TO PURCHASE COMMON STOCK. Subject to the terms
and conditions of this Agreement, Company will execute and deliver to Purchaser,
and Purchaser will acquire, at the Closing (as defined in Section 2 below), the
Warrant. Together, the shares of Common Stock acquired pursuant to Section 1.2,
the Convertible Subordinated Debenture and the Warrant are referred to herein as
the "Securities."
1.5 USE OF PROCEEDS.
(a) WORKING CAPITAL. Company will use the proceeds from the
sale of the Securities for general working capital purposes and to fund
acquisitions in the electronic contract manufacturing business pursuant to the
acquisition plan, attached hereto as Exhibit C, agreed to between Company and
Purchaser. Pending such use, Company shall place such proceeds in one or more
federally insured deposit accounts.
(b) LIMITATIONS. Notwithstanding anything herein to the
contrary, no portion of the proceeds from the sale of the Securities sold will
be used (i) for relending or reinvesting, if Company's primary purpose involves,
directly or indirectly, providing funds to others, (ii) for the purchase of debt
obligations, factoring, or the long-term leasing of equipment with no provision
for maintenance or repair, (iii) to, directly or indirectly, provide capital or
financing to a company licensed under the Small Business Investment Act of 1958,
as amended (together with the rules and regulations thereunder, the "SBI Act"),
(iv) to acquire, or to pay obligations relating to the prior acquisition of,
land or improved real estate to be held, without prompt and substantial
improvement, for resale or leasing to others, (v) outside the United States
(except that all or any portion of such proceeds may be used by Company in the
domestic production of products for distribution abroad or to acquire abroad
materials used in such production, provided the major portion of the assets and
activities of Company after such proceeds are so employed remains within the
territorial jurisdiction of the United States), (vi) for any purpose contrary to
the public interest (including but not limited to activities which are in
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violation of law or inconsistent with free competitive enterprise), (vii) to
purchase goods or services from a supplier that is an "associate" (as defined in
Section 107.50 of Title 13 of the Code of Federal Regulations (the "CFR")) of
Purchaser if 50% or more of such proceeds will be used to purchase goods or
services from any such supplier (provided, however, that (A) in no event may
such proceeds be used to purchase capital goods from an associate supplier, and
(B) such goods and services shall be at a price no greater than that charged
other customers of the associate supplier), or (viii) to acquire "farm land" (as
that term is defined in Section 107.720 of Title 13 of the CFR).
(c) UNAUTHORIZED DIVERSION. Unless specifically consented to
by Purchaser, any (i) diversion by Company of the proceeds from the sale of the
Securities from the purposes set forth in this Section 1.5 or (ii) change in
Company's business activity within the 12-month period following the Closing (as
defined in Section 2 below) that renders the Securities an ineligible investment
for Purchaser pursuant to Section 107.760(b) of Title 13 of the CFR shall
constitute an event of default under this Agreement. Upon the occurrence of such
event of default, Purchaser shall have the right to demand immediate repurchase
of, and Company shall immediately repurchase, (i) all the Common Stock acquired
pursuant to Section 1.2 above and held by Purchaser, at a per share purchase
price equal to $2.52, (ii) the Convertible Subordinated Debenture held by
Purchaser, at face value plus all accrued interest thereon, (iii) any shares of
Common Stock held by Purchaser as a result of the conversion of the Convertible
Subordinated Debenture, at a per share purchase price equal to $3.00 for any
Common Stock issued to Purchaser, and (iv) any purchased and issued Common Stock
acquired pursuant to the Warrant, at a per share purchase price equal to $3.30.
In addition, the Warrant shall be cancelled.
2. THE CLOSING.
2.1 THE CLOSING. The closing of the sale and purchase of the Common
Stock, Convertible Subordinated Debenture and the Warrant (the "Closing") under
this Agreement shall take place at the offices of Blackwell Sanders Peper Martin
LLP ("Legal Counsel's Offices"), 2300 Main, Suite 1100, Kansas City, Missouri
64108 at 10:00 a.m., Central Time, on February 7, 2000 (the "Closing Date"), or
at such other time, date and place as are mutually agreeable to Company and
Purchaser, but in no event later than 5:00 p.m., Central Time, on March 15,
2000. At the Closing, Company will deliver to Purchaser a certificate or
certificates for 198,413 Common Stock shares registered in the name of Purchaser
against receipt by Company, as consideration, of the Common Stock Purchase Price
by wire transfer, check, or other method acceptable to Company. At the Closing,
Company will deliver to Purchaser the Convertible Subordinated Debenture in the
name of the Purchaser against receipt by Company, as consideration, of the
Debenture Price, by wire transfer, check or other method acceptable to Company.
At the Closing, Company will deliver to Purchaser the Warrant in the name of the
Purchaser. In addition, the Company will pay the Purchaser a commitment fee in
the amount of $20,000 at the Closing.
2.2 If at Closing any of the applicable conditions specified in
Section 5 hereof shall not have been fulfilled, Purchaser shall, at its
election, be relieved of its obligations to purchase Securities at such Closing
without thereby waiving any other rights it may have by reason of such failure
or such non-fulfillment.
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3. REPRESENTATIONS OF COMPANY. Subject to and except as disclosed
by Company in the schedules attached hereto, Company hereby represents and
warrants to Purchaser as follows:
3.1 ORGANIZATION AND STANDING. Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Kansas and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted by it, to enter into and
perform this Agreement, and to carry out the transactions contemplated by this
Agreement. Company is duly qualified to do business as a foreign corporation in
every other jurisdiction in which the failure to so qualify would have a
material adverse effect on Company's operations or financial condition.
3.2 CAPITALIZATION. The authorized capital stock of Company
(immediately prior to the Closing) will consist of: 5,000,000 shares of common
stock, $.01 par value, of which (i) 198,413 shares are reserved for issuance of
Common Stock, (ii) 166,667 shares are reserved for issuance upon the conversion
of the Convertible Subordinated Debenture (iii) 45,635 shares are reserved for
issuance upon the exercise of the Warrant, (iv) 475,000 shares are reserved for
issuance pursuant to the Company's option plan, and (v) 2,230,500 shares are
issued and outstanding, with 150,000 shares to be issued to three individuals
pursuant to that certain Stock Purchase Agreement (as defined below).
All of the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
otherwise provided in this Agreement or as set forth on SCHEDULE 3.2 hereto: (i)
no subscription, warrant, option, convertible security, or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
Company is authorized or outstanding, (ii) there is not any commitment of
Company to issue any subscription, warrant, option, convertible security, or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of Company, and (iii)
Company has no obligation (contingent or otherwise) to purchase, redeem, or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof. Except as
otherwise provided in this Agreement or as set forth on SCHEDULE 3.2 hereto, no
person or entity is entitled to (i) any preemptive or similar right with respect
to the issuance of any capital stock of Company or (ii) any rights with respect
to the registration of any capital stock of Company under the Securities Act of
1933, as amended (the "Securities Act"). All of the issued and outstanding
shares of Common Stock have been offered, issued, and sold by Company in
compliance with applicable federal and state securities laws.
3.3 SUBSIDIARIES. Except as set forth on SCHEDULE 3.3 hereto,
Company has no subsidiaries nor owns or controls, directly or indirectly, any
other corporation, association or business entity.
3.4 DEBTHOLDERS AND STOCKHOLDERS LIST AND STOCKHOLDERS' AGREEMENTS.
The Company has no debt securities outstanding other than those notes disclosed
on SCHEDULE 3.4 hereto. Except as set forth on SCHEDULE 3.4 hereto, there are no
agreements, written or oral, between Company and any holder of its capital
stock. No provision of this Agreement activates, or will activate, the rights or
obligations of any party under a stockholder rights plan or voting agreement to
which the Company is a party. The transactions contemplated herein, including
the
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conversion and exercise of the Convertible Subordinated Debenture and the
Warrant, respectively, shall not result in any loss by the Purchaser of the
right to vote as a stockholder of the Company any shares of common stock
acquired hereunder pursuant to the provisions set forth in section 17-1286 et.
al, Control Shares Acquisitions, of the Kansas statutes.
3.5 ISSUANCE OF SECURITIES. The issuance, sale, and delivery of the
Securities in accordance with this Agreement, and the issuance and delivery of
the shares of Common Stock issuable upon conversion of the Convertible
Subordinated Debenture and exercise of the Warrant, have been or will be, on or
prior to the applicable Closing, duly authorized and reserved for issuance, as
the case may be, by all necessary corporate action on the part of Company, and
the shares when so issued, sold, and delivered against payment therefor in
accordance with the provisions of this Agreement, and the shares of Common Stock
issuable upon conversion or exercise of the Convertible Subordinated Debenture,
when issued upon such conversion or exercise, will be duly and validly issued,
fully paid, and nonassessable.
3.6 AUTHORITY FOR AGREEMENT. The execution, delivery, and
performance by Company of this Agreement and all other agreements required to be
entered into pursuant to this Agreement have been or will be, on or prior to the
applicable Closing, duly authorized by all necessary corporate action, and duly
executed and delivered by Company. This Agreement and such other agreements
constitute valid and binding obligations of Company enforceable in accordance
with their respective terms. The execution and performance of the transactions
contemplated by this Agreement and such other agreements to be executed and
delivered by Company hereunder and compliance with their provisions by Company
will not violate any provision of law and will not conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, its Articles of Incorporation or bylaws, any indenture, lease,
agreement, or other instrument to which Company is a party or by which it or any
of its properties is bound, or any decree, judgment, order, statute, rule or
regulation applicable to Company.
3.7 GOVERNMENTAL CONSENTS. No consent, approval, order, or
authorization of, or registration, qualification, designation, declaration, or
filing with, any governmental authority is required on the part of Company in
connection with the execution and delivery of this Agreement, the offer, issue,
sale and delivery of the Securities, or the other transactions to be consummated
at the applicable Closing, as contemplated by this Agreement, except such
filings as shall have been made prior to and shall be effective on and as of
such Closing. Based on the representations made by Purchaser in Section 4 of
this Agreement, the offer and sale of the Securities to Purchaser will be exempt
from registration under applicable federal and state securities laws.
3.8 LITIGATION. Except as set forth on SCHEDULE 3.8, there is no
action, suit, proceeding, or investigation pending, or, to the best of Company's
knowledge, any basis therefor or threat thereof, against Company which questions
the validity of this Agreement or Company's right to enter into it, or which
might result, either individually or in the aggregate, in any material adverse
change in Company's assets, condition (financial or otherwise), business, or
prospects, nor is there any litigation pending, or, to the best of Company's
knowledge, any basis therefor or threat thereof, against Company by reason of
the past employment relationships, the proposed activities of Company, or
negotiations by Company with possible investors in Company.
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3.9 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES. On or before the
date hereof, Company has furnished to Purchaser a complete and correct copy of
the balance sheet of Company (the "Audited Balance Sheet") as of April 30, 1999
(the "Audited Balance Sheet Date"), and the related statements of operations and
of changes in financial position for the 12 months then ended (collectively, the
"Audited Financial Statements"), a complete and correct copy of the balance
sheet of the Company (the "Unaudited Balance Sheet") as of October 31, 1999 (the
"Unaudited Balance Sheet Date"), and the related unaudited statements of
operations and of changes in financial position for the six months then ended,
(collectively, the "Unaudited Financial Statements"). (The Audited Financial
Statements and the Unaudited Financial Statements are collectively referred to
herein as the "Financial Statements"). The Financial Statements are complete and
correct, are in accordance with the books and records of Company, and present
fairly the financial condition and results of operations of Company, as of the
dates and for the periods indicated, and the Audited Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") in all material respects. Company did not have, at the Unaudited
Balance Sheet Date, any liabilities of any type which in the aggregate exceeded
$25,000, whether absolute or contingent, which were not fully reflected on the
Unaudited Balance Sheet, and, since the Unaudited Balance Sheet Date, (x) no
material change to Company's net worth has occurred and (y) Company has not
incurred or otherwise become subject to any such liabilities or obligations
except in the ordinary course of business, incurred in connection with
acquisitions publicly disclosed, or in connection with and as disclosed in this
Agreement. Attached as EXHIBIT 3.9 is certain financial and operating
information relating to DCI that was provided by the Company to the Purchaser;
provided, however, that no representation in this Section 3.9 is made as to the
accuracy of any projections, pro formas or forecasts. The projections, pro
formas and forecasts delivered to the Purchaser by the Company were prepared in
good faith on the basis of the assumptions stated therein, which assumptions
were fair in light of conditions existing at the time of delivery.
3.10 TAXES. Company has set aside sufficient funds for the payment
of all accrued and unpaid federal, state, county, local, and foreign taxes for
all current and prior periods. Company has filed or has obtained presently
effective extensions with respect to all federal, state, county, local, and
foreign tax returns which are required to have been filed by it, such returns
are true and correct and all taxes shown thereon to be due have been timely
paid. Federal income tax returns of Company have not been audited by the
Internal Revenue Service, and no controversy with respect to taxes of any type
is pending or, to Company's knowledge, threatened.
3.11 PROPERTY AND ASSETS. Company has good title to all of its
material properties and assets, including all material properties and assets
reflected in the Balance Sheet, except those disposed of in the ordinary course
of business, and none of such properties or assets is subject to any mortgage,
pledge, lien, security interest, lease, charge, or encumbrance other than those
encumbrances described in the Balance Sheet or the most recent balance sheet
delivered to Purchaser pursuant to Subsection 7.2(a)(i) below (the "Most Recent
Balance Sheet"), if any.
3.12 PATENTS AND TRADEMARKS. Company owns or possesses, or can
obtain by payment of royalties in amounts which, in the aggregate, do not
materially and adversely affect Company's proposed business and prospects, all
of the patents, trademarks, service marks, trade
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names, copyrights, proprietary rights, trade secrets, and licenses or rights to
the foregoing, necessary for the conduct of Company's business as conducted and
as proposed to be conducted. To Company's knowledge, the contract electronics
manufacturing business proposed by Company will not cause Company to infringe or
violate any of the patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets, or other proprietary rights of any other person or
entity.
3.13 INSURANCE. Company maintains valid policies of insurance with
respect to its properties and business of the kinds and in amounts not less than
is customarily obtained by corporations of established reputation engaged in the
same or similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability, and
employment-related accidents of Company's employees.
3.14 MATERIAL CONTRACTS AND OBLIGATIONS. Company has disclosed to
Purchaser a list of all material agreements of any nature to which Company is a
party or by which it is bound, including, without limitation, (a) each agreement
which requires future expenditures by Company in excess of $100,000 in the
aggregate, (b) all employment and consulting agreements, employee benefit,
bonus, pension, profit-sharing, stock option, stock purchase, and similar plans
and arrangements, and (c) any agreement to which any stockholder, officer, or
director of Company, or any "affiliate" or "associate" of such persons (as such
terms are defined in the rules and regulations promulgated under the Securities
Act), is presently a party, including any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to, any such person or entity. All of such
agreements and contracts are, to Company's knowledge, valid, binding, and in
full force and effect.
3.15 COMPLIANCE. To Company's knowledge, Company has, in all
material respects, complied with all laws, regulations, and orders applicable to
its present and proposed business and has all material permits and licenses
required thereby. There is no term or provision (other than those requiring
payment of amounts owed) of any material mortgage, indenture, contract,
agreement, or instrument to which Company is a party or by which it is bound,
or, to the knowledge of Company, of any provision of any state or federal
judgment, decree, order, statute, rule, or regulation applicable to or binding
upon Company, which materially and adversely affects or, so far as Company may
now foresee, in the future is reasonably likely to materially and adversely
affect, the business, prospects, condition, affairs, or operations of Company or
any of its properties or assets.
3.16 ABSENCE OF CHANGES. Since the Unaudited Balance Sheet Date
there has been no material adverse change in the condition, financial or
otherwise, net worth, or results of operations of Company, other than changes
occurring in the ordinary course of business, which changes have not,
individually or in the aggregate, had a material adverse effect on the business,
prospects, properties, or condition, financial or otherwise, of Company.
3.17 EMPLOYEES. Company is not aware that any employee is obligated
under any contract (including any license, covenant, or commitment of any
nature), or subject to any judgment, decree, or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of Company or would conflict with
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Company's business as conducted. To Company's knowledge, no prior employer of
any employee of Company has any right to or interest in any inventions,
improvements, discoveries, or other information assigned to Company by such
employee. All non-management employees of Company who have access to
confidential or proprietary information of Company have executed and delivered
proprietary information agreements with nondisclosure and assignment of
invention provisions ("Non-Disclosure Agreements"), and all of such agreements
are in full force and effect. None of the employees of Company is represented by
any labor union, and there is no labor strike or other labor trouble pending
with respect to Company (including, without limitation, any organizational
drive) or, to Company's knowledge, threatened.
3.18 ERISA. To the Company's knowledge, the employee benefit plans
sponsored by the Company and subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), are in compliance with ERISA. The Company is
not subject to any audit involving any of such plans and such plans are not
subject to any litigation or disputed claims for benefits.
3.19 BOOKS AND RECORDS. The minute books of Company contain complete
and accurate records of all official meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. To the Company's
knowledge, the stock records of Company are complete and reflect all issuances,
transfers, repurchases and cancellations of shares of Company's capital stock.
3.20 DISCLOSURES. Neither this Agreement nor any exhibit or schedule
hereto, nor any certificate or instrument furnished to Purchaser (or its legal
counsel) in connection with the transactions contemplated by this Agreement when
read together, contains any material misstatement of fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading. Company knows of no information or fact which has or would have a
material adverse effect on the financial condition, business or prospects of
Company which has not been disclosed to Purchaser.
3.21 SMALL BUSINESS CONCERN. Company, together with its "affiliates"
(within the meaning set forth in Section 121.103 of Title 13 of the CFR), is a
"small business concern" (as that term is defined in the SBI Act, including
Section 121.105(a) of Title 13 of the CFR). The information set forth in the
documents provided to Purchaser pursuant to the SBI Act remain accurate and
complete.
3.22 SECURITIES AND EXCHANGE COMMISSION DOCUMENTS. The Company has
made available to the Purchaser a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed by the
Company with the Securities and Exchange Commission (the "SEC") since January 1,
1997 (the "Company SEC Documents") which are all the documents (other than
preliminary material) that the Company was required to file with the SEC since
such date. As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act, or the
Securities and Exchange Act of 1934, as amended, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under
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<PAGE>
which there were made, not misleading. The financial statements of the Company
included in the Company SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in accordance with applicable requirements of GAAP
(subject, in the case of the Unaudited Financial Statements, to normal,
recurring adjustments, none of which are material) the consolidated financial
position of the Company and its consolidated subsidiaries as of their respective
dates and the consolidated results of operations and the consolidated cash flows
of the Company for the periods presented therein.
3.23 COMPLIANCE WITH SMALL BUSINESS INVESTMENT ACT REQUIREMENTS.
(a) The Company has not engaged in any activities and does not
intend to use directly or indirectly the proceeds from the issuance of the
Securities or any other proceeds received from the Purchaser, for any purpose
for which a Small Business Investment Company is prohibited from providing funds
by the Small Business Investment Act and the regulations thereunder, including
Title 13, Code of Federal Regulations, Part 107 (collectively "SBIA").
(b) Neither the Company nor any of its officers, directors, or
shareholders or, to the best of the Company's knowledge, its employees directly
or indirectly own or control, or are related to any Person who owns or controls,
any interest in, or is an officer, director, employee, stockholder, or agent of,
the Purchaser or any entity in any way related to or affiliated with the
Purchaser or any other Small Business Investment Company.
(c) The Company has not received, is not receiving and has no
intention to apply for any assistance from the Small Business Administration or
any Small Business Investment Company other than the Purchaser.
(d) The Company qualifies as a "small business concern" under,
and is in full compliance with, the provisions of SBIA. The aggregate
consolidated net worth of the Company and all other business entities affiliated
with the Company does not exceed $18,000,000, and the Company's average
consolidated net income in each of its last two Fiscal Years has not exceeded
$6,000,000.
3.24 TRANSACTION DOCUMENTS. The Company has furnished the Purchaser
with complete and correct copies of each Transaction Document and all
appendices, schedules, and exhibits attached thereto. This Agreement and the
Transaction Documents are the only agreements relating to the transactions
contemplated hereby to which the Company is a party. The Company is not, and
after giving effect to the transactions contemplated by this Agreement will not
be, in default of any of its obligations under this Agreement or any Transaction
Document, and no other party to any such Transaction Document is in default on
any covenant or agreement thereunder. In connection with the entering into of
the Transaction Documents, the Company and each opposing party in such
Transaction Document (such opposing parties collectively referred to herein as
the "Third Parties") have made certain representations and warranties to each
other. The Company hereby represents and warrants to the Purchaser that all of
the representations and warranties made by the Company in each of the
Transaction
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Documents, and in any certificates or schedules or exhibits delivered in
connection therewith, are true and correct in all material respects as of the
date hereof with the same force and effect as though made on and as of the date
hereof, and such representations and warranties are hereby confirmed to the
Purchaser as if such representations and warranties were set forth herein. In
addition, the Company hereby represents and warrants to the Purchaser that the
representations and warranties made by each of the Third Parties in each of the
Transaction Documents, and that any certificates or schedules or exhibits
delivered in connection therewith, are true and correct in all material respects
as of the date hereof with the same force and effect as though made on and as of
the date hereof, and such representations and warranties are hereby confirmed to
the Purchaser in all material respects as if such representations and warranties
were set forth herein. For purposes of the foregoing sentence (the "Pass Through
Representation"), the term "material" shall mean any inaccuracy in any
representation or warranty having an adverse effect on the Company in excess of
$100,000.
4. REPRESENTATIONS OF PURCHASER. Purchaser represents and warrants
to Company as follows:
4.1 INVESTMENT. Purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D promulgated pursuant to the Securities Act.
Purchaser has carefully reviewed the representations concerning the Company
contained in this Agreement and has made a detailed inquiry concerning Company,
its business and its personnel. The officers of Company have made available to
Purchaser any and all written information which Purchaser has requested and have
answered to Purchaser's satisfaction all inquiries made by Purchaser. Purchaser
is acquiring the Securities, for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same. Except as contemplated by
this Agreement and the Exhibits hereto, Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness, or commitment
providing for the disposition thereof.
4.2 AUTHORITY. Purchaser has full power and authority to enter into
and perform this Agreement in accordance with its terms. Purchaser has not been
organized specifically for the purpose of investing in Company.
4.3 EXPERIENCE. Purchaser has carefully reviewed the representations
concerning Company contained in this Agreement and has made a detailed inquiry
concerning Company, its business and its personnel. The officers of Company have
made available to Purchaser any and all written information Purchaser has
requested and have answered to Purchaser's satisfaction all inquiries made by
Purchaser.
4.4 ACKNOWLEDGMENT OF RELATED TRANSACTIONS. Purchaser acknowledges
that the transactions contemplated by this Agreement are subject to the
consummation of the transactions described in the Stock Purchase Agreement, the
Asset Purchase Agreement and the Loan Agreement. Purchaser acknowledges that the
consummation of the transactions contemplated by those agreements is vital to
this Agreement and is a condition to the obligation of the Company to sell the
Securities as described herein.
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5. CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to purchase the Securities at the Closing is subject to the
fulfillment, or the waiver by Purchaser, of the following conditions on or
before the Closing Date (except as expressly provided herein):
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each representation
and warranty contained in Section 3 shall be true on and as of the Closing Date
with the same effect as though such representation and warranty had been made on
and as of the Closing Date, with the exception that such representations and
warranties do not take into account the prior closing of the transactions
contemplated by the Transaction Documents.
5.2 PERFORMANCE. Company shall have substantially performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by Company prior to or at the Closing.
5.3 OPINION OF COUNSEL. Purchaser shall have received an opinion
from Blackwell Sanders Peper Martin LLP, counsel for Company, dated the Closing
Date, addressed to Purchaser, and in substantially the form and substance
attached hereto as Exhibit D.
5.4 INVESTOR'S RIGHTS AGREEMENT. The Investor's Rights Agreement
attached hereto as Exhibit E (the "Investor's Rights Agreement") shall have been
executed and delivered by Company and Purchaser.
5.5 BOARD OF DIRECTORS. Company's Board of Directors shall comprise
seven members appointed in accordance with the Investor's Rights Agreement.
5.6 SECURITIES REGISTRATIONS AND EXCHANGE LISTING. Company shall
register the Securities with the securities commissioner of each jurisdiction in
which registration is required (and such registrations shall be in compliance
with the laws of such jurisdiction on the Closing Date), or Company shall be
entitled to rely on an exemption from registration on the Closing Date. The
Company shall, no later than such date as the Securities shall be registered in
accordance with the Investor's Rights Agreement, cause the Common Stock to be
issued at the Closing to be listed for trading on the American Stock Exchange.
5.7 CERTIFICATES AND DOCUMENTS. All corporate and other proceedings
required to be taken on the part of Company to authorize and carry out this
Agreement shall have been taken, and Company shall have delivered to legal
counsel of Purchaser:
(a) GOOD STANDING CERTIFICATE. The Certificate, as of
the most recent practicable date prior to the Closing, issued by the
Secretary of State of the State of Kansas, confirming the corporate good
standing of Company on such date; and
(b) RESOLUTIONS. Resolutions of the Board of Directors of
Company, authorizing and approving all matters in connection with this Agreement
and the transactions contemplated hereby, certified by an officer of Company as
of the Closing Date.
5.8 SECURITIES COMPLIANCE. Company shall comply with any and
all required federal and state securities rules and regulations relating to
the transactions contemplated by this Agreement.
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5.9 OTHER MATTERS. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to Purchaser and its legal counsel, and Purchaser and its
legal counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
5.10 DUE DILIGENCE. The Purchaser shall have been satisfied, in its
sole and reasonable opinion with the results of its investigation of Company.
Purchaser's due diligence shall in no way limit Seller's representations,
warranties and agreements contained in this Agreement. Purchaser must also be
satisfied that the transactions contemplated by the Transaction Documents have
closed.
6. CONDITIONS TO THE OBLIGATIONS OF COMPANY. The obligations of Company
under this Agreement are subject to fulfillment, on or before the Closing Date,
of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Purchaser contained in Section 4 shall be true on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date.
6.2 SECURITIES REGISTRATIONS AND EXCHANGE LISTING. Company shall
register the Securities with the securities commissioner of each jurisdiction in
which registration is required (and such registrations shall be in compliance
with the laws of such jurisdiction on the Closing Date), or Company shall be
entitled to rely on an exemption from registration on the Closing Date. The
Company shall, no later than such date as the Securities shall be registered in
accordance with the Investor's Rights Agreement, cause the Common Stock to be
issued at the Closing to be listed for trading on the American Stock Exchange.
7. AFFIRMATIVE COVENANTS OF COMPANY.
7.1 INSPECTION. So long as the Convertible Subordinated Debenture
remains outstanding, and consistent with but not as a limitation to any similar
rights granted in the Convertible Subordinated Debenture, during normal business
hours following reasonable notice and as often as may be reasonably requested,
Company shall permit Purchaser, or any authorized representative thereof, to
visit and inspect the properties of Company, including its corporate and
financial records (and to make copies thereof and take extracts therefrom), and
to discuss its business and finances with officers of Company. Purchaser shall
be responsible for all expenses relating to all of such visits and inspections.
7.2 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) FINANCIAL STATEMENTS AND BUDGETS. So long as the
Convertible Subordinated Debenture remains outstanding, Company will deliver
to Purchaser upon request:
(i) Within 90 days after the end of each fiscal
year of Company, a balance sheet of Company as of the end of such year and
statements of income and of changes in financial condition of Company for such
year (A) prepared in accordance with
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generally accepted accounting principles, (B) audited by an independent
accounting firm acceptable to Purchaser, and (C) including (x) verification of
the use of the proceeds from the sale of the Securities for the purposes
intended by the SBI Act and regulations thereunder and (y) such other
information as is necessary to verify the financial condition of Company and the
continued eligibility of Company pursuant to Sections 107.700 to 107.880 of
Title 13 of the CFR;
(ii) Within 30 days after the end of each calendar
month (other than a calendar month during which any fiscal quarter or fiscal
year of Company ends), an unaudited balance sheet of Company as of the end of
such month and unaudited statements of income and of changes in financial
condition of Company for such month and for the current fiscal year to the end
of such month;
(iii) As soon as available, but in any event within
30 days after commencement of each new fiscal year, a business plan that shall
contain projected quarterly and annual financial statements and quarterly and
annual operating and capital budgets for such fiscal year, which such plan shall
be submitted to Company's Board of Directors for approval within such time; and
(iv) With reasonable promptness, such other
information and financial data concerning Company as Purchaser may reasonably
request, including, without limitation, quarterly and annual budgets and
summaries of financial plans.
(b) SBA INFORMATION. Company will upon request furnish from
time to time to Purchaser promptly (and in any event within 10 days of the
request) all information necessary, in the opinion of Purchaser, to enable
Purchaser to prepare and file its financial statement and its economic impact
statement on SBA Form 468 and any other information requested or required by any
governmental agency asserting jurisdiction over Purchaser. Notwithstanding any
other provision contained herein to the contrary, the covenants contained in
this subsection 7.2(b) shall continue to be effective for such period of time in
which (i) Purchaser owns or has the option to own any Common Stock, or other
securities convertible into Common Stock, of Company and (ii) Purchaser is a
licensee under the SBI Act.
(c) PREPARATION AND DELIVERY. The foregoing financial
statements shall be prepared on a consolidated basis if Company then has any
subsidiaries and shall be accompanied by a certificate of an officer of Company
that, to the best knowledge of such officer, Company is in compliance with the
covenants in this Section 7. The financial statements delivered pursuant to
clause (ii) of paragraph (a) also shall be accompanied by a certificate of an
officer of Company that, to the best knowledge of such officer, such statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied (except as noted), and fairly present the financial
condition of Company at the date thereof and for the periods covered thereby,
subject to changes to reflect year-end adjustments.
7.3 MATERIAL CHANGES AND LITIGATION. So long as the Purchaser owns
Securities or Common Stock representing not less than fifty percent (50%) of the
total potential amount of Common Stock, with respect to events of which Company
has knowledge, Company promptly will notify Purchaser of any material adverse
change in the business, properties, assets,
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or condition, financial or otherwise, of Company and of any litigation or
governmental proceeding or investigation pending or, to Company's knowledge,
threatened against Company, or any officer, director, key employee, or principal
stockholder of Company and materially and adversely affecting or which, if
adversely determined, would materially and adversely affect the present or
proposed business, properties, assets, or condition of the Company taken as a
whole.
7.4 NONDISCLOSURE AGREEMENTS. So long as the Purchaser owns
Securities or Common Stock representing not less than fifty percent (50%) of the
total potential amount of Common Stock, Company will require all persons now or
hereafter employed by Company who have access to confidential or proprietary
information of Company to enter into Non-Disclosure Agreements, unless the Board
of Directors of Company, by unanimous vote, elects to waive such requirement of
an employee of Company.
7.5 TRANSACTIONS WITH AFFILIATES. So long as the Purchaser owns
Securities or Common Stock representing not less than fifty percent (50%) of the
total potential amount of Common Stock, except as specifically acknowledged and
consented to in this Agreement, Company will not, and will not permit any
subsidiary of Company to, directly or indirectly enter into any transaction or
group of related transactions with any affiliate of Company except pursuant to
the reasonable requirements of Company's or the subsidiary's business and upon
fair and reasonable terms no less favorable to Company or the subsidiary than
would be obtainable in a comparable arm's-length transaction. For purposes of
this Section 7.5, (a) a person that directly or indirectly controls, is
controlled by, or is under common control with another person is an "affiliate"
of such other person, (b) the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise, and (c) a corporation or other entity, a majority of the
voting stock or equity interests having voting rights of which is owned or
controlled by Company, is a "subsidiary" of Company.
7.6 POST-CLOSING BLUE SKY FILINGS. Company agrees to timely make all
required post-closing filings, if any, with state blue sky authorities and the
American Stock Exchange.
7.7 CONDUCT OF THE COMPANY PENDING THE CLOSING. Company agrees that
from the date hereof to the Closing Date (subject to written consent by
Purchaser to the contrary):
(a) (i) Company will carry on its business in the usual
and ordinary course;
(ii) Company will not, except in the ordinary course
of its business and consistent with its past practice, increase the rates of
pay or benefits from any officers, employees or agents;
(iii) Company will not make any material change to
its material agreements and will not enter into any contract or commitment or
engage in any transaction not in the usual and ordinary course of its business
and the best interest of its business;
(iv) Company will not take any actions that would
result in any of the representations or warranties set forth herein being
untrue;
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(v) Company will deliver or cause to be delivered
to the Buyer supplemental information concerning events subsequent to the date
hereof that would render any statement, representation or warranty in this
Agreement or any information contained in any Schedule inaccurate or incomplete
in any material respect at any time after the date hereof until the Closing
Date.
(b) Company will not, directly or indirectly, through any
officer, director, agent or otherwise (i) solicit, initiate, or encourage
submission of proposals or offers from any person relating to any acquisition or
purchase of all or a material portion of its assets, or any merger,
consolidation or business combination with Company (except as may relate to the
contemplated acquisitions of the stock of DCI, Inc. and the assets of KHC of
Lenexa, L.L.C.), or (b) participate in any discussions or negotiations
regarding, or furnish to any other person, any non-public information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing. Company shall promptly notify Purchaser if any such
proposal or offer, or any inquiry or contact with any person with respect
thereto, is made.
(c) Company agrees to use its best efforts to obtain the
satisfaction of the conditions specified in this Agreement.
7.8 NAME CHANGE. At the next meeting of the stockholders of the
Company following the Closing of the transactions contemplated herein, the Board
of Directors of the Company shall recommend for approval by the stockholders
that the name "Airport Systems International, Inc." be changed to a name
selected by the Board of Directors and undertake a reorganization of the
Company's corporate structure.
7.9 OBLIGATION RELATING TO PASS THROUGH REPRESENTATION. The Company
shall be deemed not to have breached the Pass Through Representation in Section
3.23 above if it diligently pursues, and the Company agrees that it shall
diligently pursue, its rights and remedies relating to the breach of any
material representation or warranty made by any Third Party described therein.
8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the respective successors, assigns,
heirs, executors and administrators of the parties hereto. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9. TRANSFERS OF CERTAIN RIGHTS.
(a) APPLICABLE PROVISIONS. Without the prior written consent
of Company, only the rights under this Agreement granted to Purchaser under
Section 7 may be transferred by Purchaser and such rights may be transferred
only to a person or entity acquiring at least that portion of the Securities
from the Purchaser that is greater than 50% of the Common Stock or rights or
securities convertible into more than 50% of the Common Stock; PROVIDED,
HOWEVER, that Company is given written notice by the transferee at the time of
such transfer
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stating the name and address of the transferee and identifying the securities
with respect to which such rights are being assigned; AND, PROVIDED FURTHER that
the transferor shall only retain such rights if, following the transfer, the
transferor retains not less than such threshold amount of the Securities.
(b) TRANSFEREES. Any transferee to whom rights under Section 7
are transferred shall, as a condition to such transfer, deliver to Company a
written instrument by which such transferee agrees to be bound by the
obligations imposed upon Purchaser under this Agreement to the same extent as if
such transferee were Purchaser hereunder.
(c) SUBSEQUENT TRANSFEREES. A transferee to whom or to which
rights are transferred pursuant to this Section 9 may not again transfer such
rights to any other person or entity, other than as provided in Subsection 9(a)
or (b) above.
10. CONFIDENTIALITY. Purchaser agrees that it will keep confidential and
will not disclose or divulge any confidential, proprietary, or secret
information that Purchaser may obtain from Company pursuant to financial
statements, reports, and other materials submitted by Company to Purchaser
pursuant to this Agreement, or pursuant to visitation or inspection rights
granted hereunder, unless such information is known, or until such information
becomes known, to the public.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the closing of the transactions
contemplated hereby.
12. EXPENSES. Company shall pay at the closing all legal and other
out-of-pocket costs incurred by Purchaser with respect to the transaction (in an
aggregate amount not to exceed $30,000), including the reasonable costs and
expenses of Stinson, Mag & Fizzell, P.C. legal counsel representing Purchaser,
in connection with the review of this Agreement and the closing of the
transactions contemplated hereby. If the transaction contemplated herein does
not close, Company shall only be obligated to pay such expenses if the failure
to close is (i) due to the decision by the Company not to proceed, or (ii) due
to the decision by the Purchaser not to proceed if, and only if, the Company
failed to perform a condition of Closing as provided in this Agreement. Upon
receipt of the payment described in the foregoing sentence, Purchaser shall have
no other rights or claims against Company hereunder.
13. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid, or by facsimile, receipt confirmed:
If to Purchaser, at 233 West 47th Street, Kansas City, Missouri 64112,
facsimile number (816) 960-1777, Attention: David J. Schulte, or at
such other address or facsimile number as may have been furnished to
Company in writing by Purchaser with a copy to: Stinson, Mag & Fizzell,
P.C., 1201 Walnut, Suite 2800, Kansas City, Missouri 64141, Attention:
Lynn Snelgrove, Esq.
If to Company, at 11300 West 89th Street, Overland Park, Kansas, 66214
facsimile number (913) 492-0861, Attention: Keith S. Cowan, or at such
other address or facsimile
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number as may have been furnished to Purchaser in writing by Company, with
a copy to: Blackwell Sanders Peper Martin LLP, 2300 Main Street, Suite
1000, Kansas City, Missouri 64108, Attention: Steven F. Carman, Esq.; and
Notices provided in accordance with this Section 13 shall be deemed delivered
upon personal delivery, three days after deposit in the mail, or upon facsimile
delivery.
14. BROKERS. Each of Company and Purchaser (a) represents and warrants to
the other parties hereto that it has retained no finder or broker in connection
with the transactions contemplated by this Agreement and (b) will indemnify and
save the other party harmless from and against any and all claims, liabilities,
or obligations with respect to consulting fees or brokerage or finders' fees or
commissions in connection with the transactions contemplated by this Agreement
asserted by any person on the basis of any statement or representation alleged
to have been made by such indemnifying party.
15. COMPLIANCE AND FURTHER ASSURANCES. Each party to this Agreement agrees
to execute and deliver, or cause to be executed and delivered, all certificates,
instruments, agreements, and other documents contemplated to be executed and
delivered on or before the Closing Date and such other documents and instruments
as may be requested by such other party to consummate the transactions
contemplated by this Agreement.
16. INDEMNIFICATION.
16.1 INDEMNIFICATION BY THE COMPANY. The Company hereby indemnifies
and holds harmless, for a period of eighteen (18) months from the date hereof,
the Purchaser, its officers, directors, agents, attorneys, and affiliates, and
their respective successors and assigns, from and against any loss, damage, or
expense (including reasonable attorneys' fees) caused by or arising out of:
(a) any breach or default in the performance by the Company of
any covenant or agreement of the Company contained in this Agreement or in any
agreement executed in conjunction herewith or transaction contemplated hereby;
(b) any breach of any representation or warranty made by the
Company herein, in any Exhibit hereto, or in any certificate or other instrument
delivered by the Company pursuant hereto; or
(c) any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal and accounting fees) incident to any of the foregoing.
16.2 INDEMNIFICATION BY PURCHASER. The Purchaser hereby indemnifies
and holds harmless, for a period of eighteen (18) months from the date hereof,
the Company, its officers, directors, agents, attorneys and affiliates, and
their respective successors and assigns from and against any loss, damage, or
expense (including reasonable attorneys' fees) caused by or arising out of:
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(a) any breach of any representation or warranty made by the
Purchaser herein, in any Exhibit hereto, or in any certificate or other
instrument delivered by the Purchaser pursuant hereto; or
(b) any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses (including
reasonable legal and accounting fees) incident to the foregoing.
16.3 CONDITIONS OF INDEMNIFICATION. The respective obligations and
liabilities of the Company and the Purchaser to the other under Sections 16.1
and 16.2 hereof with respect to claims resulting from the assertion of liability
by third parties shall be subject to the following terms and conditions:
(a) within 10 days (or such earlier time as might be required
to avoid prejudicing the indemnifying party's position) after receipt of notice
of commencement of any action evidenced by service of process or other legal
pleading, or with reasonable promptness after the assertion in writing of any
claim by a third party, the party to be indemnified shall give the indemnifying
party written notice thereof together with a copy of such claim, process, or
other legal pleading, and the indemnifying party shall have the right to
undertake the defense thereof by representatives of its own choosing and at its
own expense; provided, however, that the party to be indemnified may participate
in the defense with counsel of its own choice and at its own expense.
(b) in the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the 10th day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party and at the indemnifying party's expense,
subject to the right of other indemnifying party to assume the defense of such
claims at any time prior to settlement, compromise or final determination
thereof.
(c) anything in this Section 16.3 to the contrary
notwithstanding, the indemnifying party shall not settle any claim without the
consent of the party to be indemnified unless such settlement involves only the
payment of money and the claimant provides to the party to be indemnified a
release from all liability in respect of such claim. If the settlement of the
claim involves more than the payment of money, the indemnifying party shall not
settle the claim without the prior consent of the party to be indemnified, which
consent shall not be unreasonably withheld.
(d) the party to be indemnified and the indemnifying party
will each cooperate with all reasonable requests of the other.
17. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating
to such subject matter.
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18. AMENDMENTS AND WAIVERS. This Agreement may only be amended and the
observance of any term of this Agreement may only be waived (either generally or
in a particular instance and either retroactively or prospectively) with the
written consent of the parties hereto. Any amendment or waiver effected in
accordance with this Section 18 shall be binding upon each holder of any
Securities (including shares of Common Stock into which such Securities have
been converted), each future holder of all such securities, and Company. No
waivers of or exceptions to any term, condition, or provision of this Agreement,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such term, condition, or provision.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. HEADINGS; EXHIBITS. The headings of the sections, subsections,
and paragraphs of this Agreement have been added for convenience only and
shall not be deemed to be a part of this Agreement. The exhibits attached
hereto are incorporated herein by reference and are part and parcel of this
Agreement.
21. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
22. EQUITABLE REMEDIES. The rights and remedies of any of the parties
hereto shall not be mutually exclusive (i.e., the exercise of one or more of the
provisions hereof shall not preclude the exercise of any other provision
hereof). Each party acknowledges and confirms that its breach or threatened
breach of this Agreement may cause irreparable injury to the one or more of the
other parties for which damages at law (i.e., monetary damages) may be an
inadequate remedy and agrees that, in such event, the respective rights and
obligations hereunder shall be enforceable by specific performance, injunction,
or other equitable remedy; provided, however, that nothing herein contained is
intended to, nor shall it, limit or affect any right or rights at law or by
statute or otherwise of any party aggrieved as against the other for a breach or
threatened breach of any provision hereof, it being the intention hereof to make
clear the agreement of the parties that the respective rights and obligations of
the parties hereunder shall be enforceable in equity as well as at law or
otherwise.
23. INTERPRETATION.
23.1 DIRECTLY OR INDIRECTLY. Any provision of this Agreement which
refers to an action which may be taken by a party hereto, or which a party
hereto is prohibited from taking, shall include any such action taken directly
or indirectly by or on behalf of such party, including by or on behalf of any
affiliate or agent of such party.
23.2 NO PRESUMPTION. In the event any claim is made by either
party hereto relating to any conflict, omission, or ambiguity in this
Agreement, no presumption or burden of
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proof or persuasion shall be implied by virtue of the fact that this Agreement
was prepared by or at the request of a particular party or its counsel.
23.3 REFERENCES TO THIS AGREEMENT. References to numbered or
lettered articles, sections, and subsections refer to articles, sections and
subsections, respectively, of this Agreement unless otherwise expressly stated.
23.4 PERSON. Except as otherwise expressly provided in this
Agreement, all references to the word "person" in this Agreement include
individuals, partnerships, corporations, limited liability companies, trusts,
and any other legal entities or associations.
24. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto and their successors and assigns hereunder, shall be interpreted,
construed, and enforced in accordance with the laws of the State of Kansas,
excluding any conflict-of-laws rule or principle that might refer the governance
or construction of this Agreement to the law of another jurisdiction.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
COMPANY:
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:________________________________
Keith S. Cowan
President
PURCHASER:
KCEP VENTURES II, L.P.
By: KCEP II, L.C., its General Partner
By:________________________________
Name: David J. Schulte
Title: Managing Director
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EXHIBIT A
CONVERTIBLE SUBORDINATED DEBENTURE
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EXHIBIT B
WARRANT
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EXHIBIT C
ACQUISITION PLAN
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EXHIBIT D
LEGAL OPINION
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EXHIBIT E
INVESTOR'S RIGHTS AGREEMENT
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LOAN AND SECURITY AGREEMENT
This Agreement (as hereinafter defined) is made effective this
7th day of February, 2000 by and between Airport Systems International, Inc.
("ASI"), DCI, Inc. ("DCI") (collectively, jointly and severally, the
"Borrower") and Bank of America, N.A. ("LENDER").
PRELIMINARY STATEMENTS
(A) On January 3, 2000, ASI entered into an agreement to purchase
all of the stock of DCI (the "ACQUISITION").
(B) ASI and DCI each have existing notes, loans, indebtedness,
extensions of credit and credit facilities with Bank of America, all as more
particularly described on EXHIBIT E hereof ("EXISTING LOANS").
(C) In order to refinance and restate the Existing Loans, facilitate
the Acquisition, to provide working capital to Borrower, for real estate
purposes and to provide letters of credit to Borrower from time to time,
Borrower has requested (i) loans from Lender to Borrower on a revolving basis in
the amount of $8,000,000; (ii) term loans from Lender to Borrower in the amount
of $1,178,000; and (iii) an irrevocable direct-pay letter of credit facility in
the amount of $2,599,572.60.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is agreed by and among the parties hereto as follows:
ARTICLE 1 - DEFINITIONS
Section 1.1 DEFINITIONS.
For the purposes of this Agreement:
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACQUIRE", as applied to any Business Unit or Investment, means the
acquisition of such Business Unit or Investment by purchase, exchange, issuance
of stock or other securities, or by merger, reorganization or any other method.
"AFFILIATE" means, with respect to a Person, (a) any executive
officer, director, employee or managing agent of such Person, (b) any spouse,
parents, brothers, sisters, children and grandchildren of such Person, (c) any
association, partnership, trust, entity or enterprise in which such Person is a
director, executive officer or general partner, (d) any other Person that, (i)
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such given Person, (ii) directly
or indirectly beneficially owns or holds 10% or more of any class of voting
stock or partnership or other equity interest of such
<PAGE>
Person or any Subsidiary of such Person, or (iii) 10% or more of the voting
stock or partnership or other equity interest of which is directly or indirectly
beneficially owned or held by such Person or a Subsidiary of such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or partnership or other
interests, by contract or otherwise.
"AGREEMENT" means this Agreement, including the Exhibits and
Schedules hereto, and all amendments, modifications and supplements hereto and
thereto and restatements hereof and thereof.
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"ASI RECEIVABLE" means a Receivable owed to ASI.
"ASSETS" means all assets of a Person determined in accordance with
GAAP and includable on a balance sheet of such Person prepared in accordance
with GAAP.
"AVAILABILITY" means, as of the date of determination, the aggregate
amount of Revolving Credit Loans available to be borrowed by the Borrower
hereunder in accordance with SECTION 2A.1 less the sum of the outstanding
principal balance of all Revolving Credit Loans hereunder as of such date.
"BENEFIT PLAN" means an employee benefit plan as defined in Section
3(3) of ERISA (other than a Multiemployer Plan) in respect of which a Person or
any Related Company is, or within the immediately preceding 6 years was, an
"employer" as defined in Section 3(5) of ERISA, including such plans as may be
established after the Agreement Date.
"BOND DOCUMENTS" means any and all documentation evidencing,
describing or relating to the Bonds.
"BOND LETTER OF CREDIT" means that certain Irrevocable Direct Pay
Letter of Credit issued by the Lender for the benefit of the Borrower (as
successor in interest to KHC of Lenexa, L.L.C.) in connection with DCI's
obligations under that certain Lease between the City of Lenexa, Kansas and
Borrower (as successor in interest to KHC of Lenexa, L.L.C.) dated as of
September 1, 1998 with reference to those certain City of Lenexa, Kansas
Variable Rate Demand Industrial Development Revenue Bonds (DCI, Inc. Project)
Series 1998 (the "BONDS").
"BORROWER" means Airport Systems International, Inc. and DCI, Inc.,
collectively, jointly and severally. All references herein to "Borrower" shall
be deemed to mean each of ASI and DCI individually, as applicable, and ASI and
DCI jointly; and all representations by "Borrower" herein shall be deemed to
mean each of ASI and DCI individually, as applicable, and ASI and DCI jointly.
"BORROWING BASE" means at any time, the sum of the Revolving Credit
Loan A Borrowing Base and the Revolving Credit Loan B Borrowing Base.
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"BORROWING BASE B CERTIFICATE" means a certificate in the form of
EXHIBIT B attached hereto.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which banks in Kansas City, Missouri are authorized to close.
"BUSINESS UNIT" means the assets constituting the business, or a
division or operating unit thereof, of any Person.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit) which are not, in accordance with
GAAP, treated as expense items for such Person in the year made or incurred or
as a prepaid expense applicable to a future year or years.
"CAPITALIZED LEASE" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" means and includes all of the Borrower's right, title
and interest in and to each of the following, wherever located and whether now
or hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Deposit Accounts,
(g) all Real Estate
(h) all goods and other property, whether or not delivered,
(i) the sale or lease of which gives or purports to give rise to any
Receivable, including, but not limited to, all merchandise returned or
rejected by or repossessed from customers, or (ii) securing any
Receivable, including, without limitation, all rights as an unpaid vendor
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or lienor (including, without limitation, stoppage in transit, replevin
and reclamation) with respect to such goods and other properties,
(i) all mortgages, deeds to secure debt and deeds of trust on
real or personal property, guaranties, leases, security agreements and
other agreements and property which secure or relate to any Receivable or
other Collateral or are acquired for the purpose of securing and enforcing
any item thereof,
(j) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and instruments
evidencing or pertaining to any and all items of Collateral,
(k) all files, correspondence, computer programs, tapes, disks
and related data processing software which contain information identifying
or pertaining to any of the Collateral or any Account Debtor or showing
the amounts thereof or payments thereon or otherwise necessary or helpful
in the realization thereon or the collection thereof,
(l) all cash deposited with the Lender or any Affiliate
thereof or which the Lender is entitled to retain or otherwise possess as
collateral pursuant to the provisions of this Agreement or any of the
Security Documents, and
(m) any and all products and cash and non-cash proceeds of the
foregoing (including, but not limited to, any claims to any items referred
to in this definition and any claims against third parties for loss of,
damage to or destruction of any or all of the Collateral or for proceeds
payable under or unearned premiums with respect to policies of insurance)
in whatever form, including, but not limited to, cash, negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements and other documents.
(o) all of the stock of DCI owned by ASI, such stock
constituting 100% of the issued and outstanding stock of DCI.
"CONTRACT RIGHTS" means and includes, as to any Person, all of
such Person's then owned or existing and future acquired or arising rights
under contracts not yet earned by performance and not evidenced by an
instrument or chattel paper, to the extent that the same may lawfully be
assigned.
"CURRENT RATIO" means the ratio of Borrower's current Assets
to Borrower's current Liabilities measured at any given time.
"DCI RECEIVABLE" means a Receivable owed to DCI.
"DEFAULT" means any of the events specified in SECTION 11.1
that, with the passage of time or giving of notice or both, would
constitute an Event of Default.
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"DEFAULT MARGIN" means 3%.
"DEBT SERVICE COVERAGE RATIO" means on a rolling basis for the
immediately preceding four (4) quarters, the ratio of (i) Net Income
(excluding any after-tax gains or losses on the sale of assets (other than
the sale of Inventory in the ordinary course of business) and excluding
other after-tax extraordinary gains or losses), PLUS interest expense,
PLUS depreciation and amortization deducted in determining net income for
such period, OVER (ii) current principal maturities of long term debt
(including without limitation all Subordinated Debt) and Capitalized Lease
Obligations (including without limitation all payments by Borrower under
the Bond Documents) paid or scheduled to be paid during such period, PLUS
interest expense.
"DEPOSIT ACCOUNTS" means any demand, time, savings, passbook
or like account maintained with a bank, savings and loan association,
credit union or like organization, other than an account evidenced by a
certificate of deposit that is an instrument under the UCC.
"DISBURSEMENT ACCOUNT" means the account maintained by and in
the name of the Borrower with the Lender for the purpose of disbursing
Revolving Credit Loan proceeds and amounts credited thereto pursuant to
SECTIONS 2A.3(C)(I)(B) and 7.1(B)(II).
"DOLLAR" and "$" means freely transferable United States
dollars.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time, and any successor statute.
"EBITDA" means, on a rolling basis for the immediately
preceding four (4) quarters, Net Income (or Net Loss) PLUS interest
expense, income tax expense, depreciation and amortization for such period
determined by GAAP.
"EFFECTIVE DATE" means the later of (a) the Agreement Date,
and (b) the first date on which all of the conditions set forth in SECTION
4.1 shall have been fulfilled or waived by the Lender.
"EFFECTIVE INTEREST RATE" means the rate of interest per annum
on the Loans in effect from time to time pursuant to the provisions of
SECTION 3.1(A), (B) and (C).
"ELIGIBLE EXPORT INVENTORY" means Inventory of ASI which would
otherwise be Eligible Inventory but is not Eligible Inventory only because
it is deemed Export Inventory by EXIMBANK or Lender for purposes of the
EXIMBANK Financing Documents.
"ELIGIBLE EXPORT RECEIVABLE" means any Receivable of ASI which
would otherwise be an Eligible Receivable but is not an Eligible
Receivable only because it is (i) deemed a Export Receivable by EXIMBANK
or Lender for purposes of the EXIMBANK
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Financing Documents and which Receivable (ii) may not meet the requirements
of SUBSECTION (F) of the definition of Eligible Receivable.
"ELIGIBLE INVENTORY" means items of Inventory of the Borrower
held for sale in the ordinary course of the business of the Borrower (but
not including packaging or shipping materials or maintenance supplies)
which are deemed by the Lender in the exercise of its sole but reasonable
discretion to be eligible for inclusion in the calculation of the
Borrowing Base as set forth herein. Unless otherwise approved in writing
by the Lender, no Inventory shall be deemed to be Eligible Inventory
unless it meets all of the following requirements: (a) such Inventory is
owned by the Borrower, is subject to the Security Interest, which is
perfected as to such Inventory, and is subject to no other Lien whatsoever
other than a Permitted Lien; (b) such Inventory consists of raw materials
or finished goods and does not consist of work-in-process, supplies or
consigned goods; (c) such Inventory is in good condition and meets all
standards applicable to such goods, their use or sale imposed by any
governmental agency, or department or division thereof, having regulatory
authority over such matters; (d) such Inventory is currently either usable
or saleable, at prices approximating at least the cost thereof, in the
normal course of the Borrower's business; (e) such Inventory is not
obsolete or returned or repossessed or used goods taken in trade; (f) such
Inventory is located at one of the locations listed in SCHEDULE 5.1(U);
(g) such Inventory is in the possession and control of the Borrower and
not any third party, or, if located in a warehouse or other facility
leased by the Borrower, the warehouseman or lessor has delivered to the
Lender a waiver and consent in form and substance satisfactory to the
Lender; (h) such Inventory is not Export Inventory; and (i) such Inventory
of ASI does not exceed twenty-five percent (25%) of all Inventory of ASI.
"ELIGIBLE RECEIVABLE" means the unpaid portion of a Receivable
payable in Dollars to the Borrower net of any returns, discounts, claims,
credits, charges or other allowances, offsets, deductions, counterclaims,
disputes or other defenses and reduced by the aggregate amount of all
reserves, limits and deductions provided for in this definition and
elsewhere in this Agreement which is deemed by the Lender in the exercise
of its sole but reasonable discretion to be eligible for inclusion in the
calculation of the Borrowing Base as set forth herein. Unless otherwise
approved in writing by the Lender, no Receivable shall be deemed an
Eligible Receivable unless it meets all of the following requirements: (a)
such Receivable is owned by the Borrower and represents a complete bona
fide transaction which requires no further act under any circumstances on
the part of the Borrower to make such Receivable payable by the Account
Debtor; (b) as to any DCI Receivable, such Receivable is not unpaid more
than 60 days past its due date or more than 90 days after the date of the
original invoice, and as to any ASI Receivable, such Receivable is not
unpaid more than 90 days after the date of the original invoice; (c) such
Receivable is not retainage; (d) such Receivable does not arise out of any
transaction with any Subsidiary or Affiliate of the Borrower; (e) such
Receivable does not arise out of any transaction with any creditor, lessor
or supplier of the Borrower, including deposits, except that such
Receivables described in this CLAUSE D which are otherwise Eligible
Receivables but for this CLAUSE D will be deemed Eligible Receivables to
the extent they exceed any accounts payable to such creditors, lessors or
suppliers of Borrower; (f) such Receivable is not owing by an Account
Debtor more than 25% of whose then-existing
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accounts owing to the Borrower do not meet the requirements set forth in
CLAUSE B above; (g) the Account Debtor with respect to such Receivable is
not located outside of the United States of America; (h) such Receivable is
not subject to the Assignment of Claims Act of 1940, as amended from time
to time, or any applicable law now or hereafter existing similar in effect
thereto, as determined in the sole discretion of the Lender, or to any
provision prohibiting its assignment or requiring notice of or consent to
such assignment; (i) the Borrower is not in breach of any express or
implied representation or warranty with respect to the goods the sale of
which gave rise to such Receivable; (j) the Account Debtor with respect to
such Receivable is not insolvent or the subject of any bankruptcy or
insolvency proceedings of any kind or of any other proceeding or action,
threatened or pending, which might, in the Lender's sole judgment, have a
Materially Adverse Effect on such Account Debtor; (k) the goods the sale of
which gave rise to such Receivable were shipped or delivered to the Account
Debtor on an absolute sale basis and not on a bill and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return basis or
on the basis of any other similar understanding, and such goods have not
been returned or rejected; (l) as to any DCI Receivable, such Receivable is
not owing by an Account Debtor who or along with a group of affiliated
Account Debtors has then-existing accounts owing to DCI which exceed in
face amount 15% of DCI's total Eligible Receivables, except that otherwise
Eligible Receivables owing to DCI by Phillips Plastics Corporation shall be
Eligible Receivables provided that they do not exceed in face amount 35% of
DCI's total Eligible Receivables, and as to any ASI Receivable, such
Receivable is not owing by an Account Debtor who or along with a group of
affiliated Account Debtors has then-existing accounts owing to ASI which
exceed in face amount 40% of the ASI's total Eligible Receivables; (m) such
Receivable is evidenced by an invoice or other documentation in form
acceptable to the Lender containing only terms normally offered by the
Borrower, and dated no later than the date of shipment; (n) such Receivable
is a valid, legally enforceable obligation of the Account Debtor with
respect thereto and is not subject to any present, or contingent (and no
facts exist which are the reasonable basis for any future), offset,
deduction or counterclaim, dispute or other defense on the part of such
Account Debtor; (o) such Receivable is not evidenced by chattel paper or an
instrument of any kind, unless such chattel paper or instrument has been
delivered and endorsed and/or assigned to the Lender; (p) if such
Receivable arises from the performance of services, such services have been
fully performed; and (q) such Receivable is subject to the Security
Interest, which is perfected as to such Receivable, and is subject to no
other Lien whatsoever other than a Permitted Lien and the goods giving rise
to such Receivable were not, at the time of the sale thereof, subject to
any Lien other than a Permitted Lien.
"ENVIRONMENTAL LAWS" means all federal, state, local and
foreign laws now or hereafter in effect relating to pollution or
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or
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industrial, toxic or hazardous substances or wastes into the environment
(including, without limitation, ambient air, surface water, ground water
or land) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, removal, transport or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes, and any and all regulations, notices or
demand letters issued, entered, promulgated or approved thereunder.
"EQUIPMENT" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising machinery,
apparatus, equipment, motor vehicles, tractors, trailers, rolling stock,
fittings, and other tangible personal property (other than Inventory) of
every kind and description used in such Person's business operations or
owned by such Person or in which such Person has an interest and all
parts, accessories and special tools and all increases and accessions
thereto and substitutions and replacements therefor.
"EVENT OF DEFAULT" means any of the events specified in
SECTION 11.1.
"EXIMBANK" means the Export-Import Bank of the United States.
"EXIMBANK FINANCING DOCUMENTS" means the Letter of Credit,
Loan and Security Agreement by and between Lender and Borrower dated
February 7, 2000 and attached hereto as EXHIBIT D together with each of
the Financing Documents referred to therein.
"EXPORT INVENTORY" means Inventory which is specifically
designated for sale to a non-U.S. Person and all Inventory deemed "Export
Inventory" pursuant to the EXIMBANK Financing Documents.
"EXPORT RECEIVABLES" has the meaning assigned to it in the
EXIMBANK Financing Documents.
"FINANCING STATEMENTS" means the Uniform Commercial Code
financing statements executed and delivered by the Borrower to the Lender,
naming the Lender as secured party and the Borrower as debtor, in
connection with this Agreement.
"FIXED CHARGES" means, for any period, (a) Interest Expense,
plus (b) payments of principal actually made with respect to Indebtedness,
including payments with respect to Capitalized Leases.
"FUNDED DEBT RATIO" means Indebtedness for Money Borrowed
(but specifically excluding Subordinated Debt) PLUS outstanding Letters of
Credit OVER EBITDA.
"GAAP" means generally accepted accounting principles
consistently applied and maintained throughout the period indicated and
consistent with the prior financial practice of the Person referred to.
"GENERAL INTANGIBLES" means, as to any Person, all of such
Person's then owned or existing and future acquired or arising general
intangibles, choses in action and causes of action and all other
intangible personal property of such Person of every kind
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and nature (other than Receivables), including, without limitation,
Intellectual Property, corporate or other business records, inventions,
designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises,
tax refund claims, reversions or any rights thereto and any other amounts
payable to such Person from any Benefit Plan, Multiemployer Plan or other
employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds
thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key
employees on which such Person is beneficiary and any letter of credit,
guarantee, claims, security interest or other security held by or granted
to such Person to secure payment by an Account Debtor of any of the
Receivables.
"GOVERNMENTAL APPROVALS" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local,
foreign national or provincial, and all agencies thereof.
"GOVERNMENTAL AUTHORITY" means any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand
jury or arbitrator, in each case whether foreign or domestic.
"GUARANTY", "GUARANTEED" or to "GUARANTEE," as applied to
any obligation of another Person shall mean and include
(a) a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), directly
or indirectly, in any manner, of any part or all of such obligation of
such other Person, and
(b) an agreement, direct or indirect, contingent or otherwise,
and whether or not constituting a guaranty, the practical effect of which
is to assure the payment or performance (or payment of damages in the
event of nonperformance) of any part or all of such obligation of such
other Person whether by (i) the purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or lessor) of property or the
purchase or sale of services primarily for the purpose of enabling the
obligor with respect to such obligation to make any payment or performance
(or payment of damages in the event of nonperformance) of or on account of
any part or all of such obligation or to assure the owner of such
obligation against loss, (iii) the supplying of funds to, or in any other
manner investing in, the obligor with respect to such obligation, (iv)
repayment of amounts drawn down by beneficiaries of letters of credit, or
(v) the supplying of funds to or investing in a Person on account of all
or any part of such Person's obligation under a guaranty of any obligation
or indemnifying or holding harmless, in any way, such Person against any
part or all of such obligation.
"INDEBTEDNESS" of any Person means, without duplication, (a)
Liabilities, (b) all obligations for Money Borrowed or for the deferred purchase
price of property or services or in
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respect of reimbursement obligations under letters of credit, (c) all
obligations represented by bonds, debentures, notes and accepted drafts that
represent extensions of credit, (d) Capitalized Lease Obligations, (e) all
obligations (including, during the noncancellable term of any lease in the
nature of a title retention agreement, all future payment obligations under such
lease discounted to their present value in accordance with GAAP) secured by any
Lien to which any property or asset owned or held by such Person is subject,
whether or not the obligation secured thereby shall have been assumed by such
Person, (f) all obligations of other Persons which such Person has Guaranteed,
including, but not limited to, all obligations of such Person consisting of
recourse liability with respect to accounts receivable sold or otherwise
disposed of by such Person, and (g) in the case of the Borrower (without
duplication) the Loans.
"INITIAL LOANS" means the Revolving Credit Loans, Term Loans made
and Letters of Credit issued to the Borrower on the Effective Date.
"INSTALLMENT PAYMENT DATE" means the fifteenth day of each month,
commencing on March 15, 2000.
"INTELLECTUAL PROPERTY" means, as to any Person, all of such
Person's then owned existing and future acquired or arising patents, patent
rights, copyrights, works which are the subject of copyrights, trademarks,
service marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to sue for past, present and future infringements of any of the
foregoing.
"INTEREST EXPENSE" means interest on Indebtedness during the period
for which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind.
"INTEREST PAYMENT DATE" means the fifteenth day of each calendar
month commencing on March 15, 2000 and continuing thereafter until the Secured
Obligations have been irrevocably paid in full.
"INTEREST RATE PROTECTION AGREEMENT" means (a) any and all rate swap
transactions, basis swaps, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, or any other similar transactions or any combination of any of
the foregoing (including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject to any master
agreement, or (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by,
any form of master agreement published by the International Swaps and
Derivatives Associations, Inc., or any other master agreement (any such master
agreement,
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together with any related schedules, as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, a "Master
Agreement"), including but not limited to any such obligations or liabilities
under any Master Agreement.
"INVENTORY" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) goods
intended for sale or lease or for display or demonstration, (b) work in process,
(c) raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of goods or
otherwise used or consumed in the conduct of business, and (d) documents
evidencing and general intangibles relating to any of the foregoing.
"INVESTMENT" means, with respect to any Person: (a) the direct or
indirect purchase or acquisition of any beneficial interest in, any share of
capital stock of, evidence of Indebtedness of or other security issued by any
other Person, (b) any loan, advance or extension of credit to, or contribution
to the capital of, any other Person, excluding advances to employees in the
ordinary course of business for business expenses, (c) any Guaranty of the
obligations of any other Person, or (d) any commitment or option to take any of
the actions described in clauses (a), (b) or (c) above.
"LENDER" means Bank of America, N.A., a national banking
association, and its successors and assigns.
"LENDER'S OFFICE" means the office of the Lender specified in or
determined in accordance with the provisions of SECTION 12.1(C).
"LENEXA PROPERTY" means that certain real property located at 15301
West 109th Street, Lenexa, Kansas 66219 as more particularly described in
SCHEDULE 5.1(B)(B) hereof.
"LETTER OF CREDIT" means those letters of credit issued by Lender
pursuant to paragraph SECTION 2C.1.
"LETTER OF CREDIT OBLIGATIONS" means, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of all Letters
of Credit except the Bond Letter of Credit; and (ii) the aggregate unreimbursed
amount of all drawn Letters of Credit not already converted to a Loan hereunder.
"LIABILITIES" means all liabilities of a Person determined in
accordance with GAAP and includable on a balance sheet of such Person prepared
in accordance with GAAP, including without limitation, Borrower's obligations
under the Bond Documents.
"LIABILITIES RATIO" means Liabilities PLUS outstanding Letters of
Credit LESS Subordinated Debt OVER Tangible Net Worth. For purposes of this
definition, the obligations of the Borrower under the Bond Documents will not be
"double counted" with the Bond Letter of Credit Obligation.
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"LIEN" as applied to the property of any Person means: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person or upon the income or
profits therefrom, (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person, (c) any Indebtedness which is unpaid more than 30 days
after the same shall have become due and payable and which if unpaid would by
law (including, but not limited to, bankruptcy and insolvency laws) or otherwise
be given any priority whatsoever over general unsecured creditors of such
Person, and (d) the filing of, or any agreement to give, any financing statement
under the UCC or its equivalent in any jurisdiction.
"LOAN" means any Revolving Credit Loan or Term Loan, as well as all
such Loans collectively.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Security Documents and each other instrument, agreement and document executed
and delivered by the Borrower in connection with this Agreement and each other
instrument, agreement or document referred to herein or contemplated hereby.
"MATERIALLY ADVERSE EFFECT" means any act, omission, event or
undertaking which would, singly or in the aggregate, have a materially adverse
effect upon (a) the business, assets, properties, liabilities, condition
(financial or otherwise), results of operations or business prospects of the
Borrower or any of its Subsidiaries, (b) the respective ability of the Borrower
or any of its Subsidiaries to perform any obligations under this Agreement or
any other Loan Document to which it is a party, or (c) the legality, validity,
binding effect, enforceability or admissibility into evidence of any Loan
Document or the ability of Lender to enforce any rights or remedies under or in
connection with any Loan Document; in any case, whether resulting from any
single act, omission, situation, status, event, or undertaking, together with
other such acts, omissions, situations, statuses, events, or undertakings.
"MAXIMUM CREDIT FACILITY" means Eleven Million, Seven Hundred
Seventy-Seven Thousand, Five Hundred Seventy-Two and 60/100 Dollars
($11,777,572.60).
"MONEY BORROWED" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than trade Indebtedness) or that was issued
or assumed as full or partial payment for property, (c) Indebtedness that
constitutes a Capitalized Lease Obligation, and (d) Indebtedness that is such by
virtue of CLAUSE (F) of the definition thereof, but only to the extent that the
obligations Guaranteed are obligations that would constitute Indebtedness for
Money Borrowed.
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"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or a Related Company is
required to contribute or has contributed within the immediately preceding 6
years.
"NET INCOME" or "NET LOSS" means, as applied to any Person, the net
income (or net loss) of such Person for the period in question after giving
effect to deduction of or provision for all operating expenses, all taxes and
reserves (including reserves for deferred taxes and all other proper
deductions), all determined in accordance with GAAP.
"NET WORTH" of any Person means the total shareholders' equity
(including Subordinated Indebtedness, capital stock, additional paid-in capital
and retained earnings, after deducting treasury stock) which would appear as
such on a balance sheet of such Person prepared in accordance with GAAP.
"NOTE" means each of the Revolving Credit Notes and the Term Notes,
and "NOTES" means more than one of such notes.
"NOTICE OF BORROWING" has the meaning set forth in SECTION
2A.2(A)(III).
"OBLIGOR" means the Borrower, each party to the Security Documents
(other than the Lender), and each other party at any time primarily or
secondarily, directly or indirectly, liable on any of the Secured Obligations,
including without limitation the Guarantor.
"OLATHE PROPERTY" means that certain real property located at 14812
West 117th Street, Olathe, Kansas 66062 as more particularly described in
SCHEDULE 5.1(B)(B) hereof.
"OPERATING LEASE" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property.
"OVERLAND PARK PROPERTY" means that certain real property located at
11300 West 89th Street, Overland Park, Kansas 66214 as more particularly
described in SCHEDULE 5.1(B)(B) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"PERMITTED INDEBTEDNESS FOR MONEY BORROWED" means (a) Permitted
Purchase Money Indebtedness, and (b) Subordinated Indebtedness.
"PERMITTED INVESTMENTS" means Investments of the Borrower in: (a)
negotiable certificates of deposit, time deposits and banker's acceptances
issued by the Lender or any Affiliate of the Lender or by any United States bank
or trust company having capital, surplus and undivided profits in excess of
$250,000,000, (b) any direct obligation of the United States of America or any
agency or instrumentality thereof which has a remaining maturity at the time of
purchase of not more than one year and repurchase agreements relating to the
same, (c) sales on credit in the ordinary course of business on terms customary
in the industry, and (d) notes,
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accepted in the ordinary course of business, evidencing overdue accounts
receivable arising in the ordinary course of business.
"PERMITTED LIENS" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases, only if payment shall not
at the time be required to be made in accordance with SECTION 8.4, and (ii) in
the case of warehousemen or landlords controlling locations where Inventory is
located, only if such liens have been waived or subordinated to the Security
Interest in a manner satisfactory to the Lender; (b) Liens consisting of
deposits or pledges made in the ordinary course of business in connection with,
or to secure payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or under surety or performance bonds, in each
case arising in the ordinary course of business; (c) Liens constituting
encumbrances in the nature of zoning restrictions, easements and rights or
restrictions of record on the use of the Borrower's real estate, which in the
sole but reasonable judgment of the Lender do not materially detract from the
value of such real estate or impair the use thereof in the business of the
Borrower; (d) Purchase Money Liens securing Permitted Purchase Money
Indebtedness; (e) Liens of the Lender arising under this Agreement and the other
Loan Documents; (f) Liens arising out of or resulting from any judgment or
award, the time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Borrower is fully protected by insurance
(subject to a reasonable deductible) or in respect of which the Borrower shall
at any time in good faith be prosecuting an appeal or proceeding for a review
and in respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured, and as to which appropriate reserves have
been established on the books of the Borrower; (g) Liens specifically described
in and created by the Bond Documents; and (h) Liens with respect to the
Subordinated Indebtedness.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means Purchase Money
Indebtedness secured only by Purchase Money Liens and Capitalized Lease
Obligations, incurred by the Borrower after the Agreement Date, up to an
aggregate amount outstanding at any time equal to $50,000.
"PERSON" means an individual, corporation, partnership, association,
trust or unincorporated organization or a government or any agency or political
subdivision thereof.
"PRIME RATE" means during the period from the Effective Date through
the last day of the month in which the Effective Date falls, the per annum rate
of interest publicly announced by the Lender at its principal office as its
"prime rate" as in effect on the Effective Date, and thereafter during each
succeeding calendar month, means such "prime rate" as in effect on the last
Business Day of the immediately preceding calendar month. Any change in an
interest rate resulting from a change in the Prime Rate shall become effective
as of 12:01 a.m. on the first day of the month following the month in which such
change was announced. The Prime Rate is a reference used by the Lender in
determining interest rates on certain loans and is not intended to be the lowest
rate of interest charged on any extension of credit to any debtor.
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"PURCHASE MONEY INDEBTEDNESS" means Indebtedness created to finance
the payment of all or any part of the purchase price (not in excess of the fair
market value thereof) of any tangible asset (other than Inventory) and incurred
at the time of or within 10 days prior to or after the acquisition of such
tangible asset.
"PURCHASE MONEY LIEN" means any Lien securing Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
tangible asset (other than Inventory) the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.
"REAL PROPERTY" means all real property owned or leased by Borrower
including without limitation, the Lenexa Property, Olathe Property and Overland
Park Property.
"RECEIVABLES" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) rights to the
payment of money or other forms of consideration of any kind (whether classified
under the UCC as accounts, contract rights, chattel paper, general intangibles
or otherwise) including, but not limited to, accounts receivable, letters of
credit and the right to receive payment thereunder, chattel paper, tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments, documents,
acceptances and all other debts, obligations and liabilities in whatever form
from any Person and guaranties, security and Liens securing payment thereof, (b)
goods, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise to, any such right to payment or other debt,
obligation or liability, and (c) cash and non-cash proceeds of any of the
foregoing.
"RELATED COMPANY" means, as to any Person, any (a) corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as such Person, (b) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with such Person, or (c) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person or any corporation described in CLAUSE (A) above or any partnership,
trade or business described in clause (b) above.
"RESTRICTED DISTRIBUTION" by any Person means (a) its retirement,
redemption, purchase, or other acquisition for value of any capital stock or
other equity securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities or partnership interests, (c) any loan or advance by such Person
to, or other investment by such Person in, the holder of any of such securities
or partnership interests, and (d) any other payment by such Person in respect of
such securities or partnership interests.
"RESTRICTED PAYMENT" means (a) any redemption, repurchase or
prepayment or other retirement, prior to the stated maturity thereof or prior to
the due date of any regularly scheduled installment or amortization payment with
respect thereto, of any Indebtedness of a Person (other than the Secured
Obligations and trade debt), and (b) the payment by any Person of
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the principal amount of or interest on any Indebtedness (other than trade debt)
owing to an Affiliate of such Person.
"REVOLVING CREDIT FACILITY" means the facility for the Revolving
Credit Loans in the principal sum of up to $8,000,000.
"REVOLVING CREDIT LOANS" means loans made to the Borrower pursuant
to SECTION 2A.1.
"REVOLVING CREDIT LOAN A" means Revolving Credit Loans made to
Borrower pursuant to the EXIMBANK Financing Documents.
"REVOLVING CREDIT LOAN B" means Revolving Credit Loans made to
Borrower pursuant to Section 2A.1(b).
"REVOLVING CREDIT LOAN A AVAILABILITY" means, as of the date of
determination, the amount of Revolving Credit Loans available to be borrowed by
the Borrower pursuant to the EXIMBANK Financing Documents.
"REVOLVING CREDIT LOAN B AVAILABILITY" means, as of the date of
determination, the amount of Revolving Credit Loans available to be borrowed by
the Borrower hereunder in accordance with SECTION 2A.1(B) LESS the sum of the
aggregate outstanding principal balance of all Revolving Credit Loan B hereunder
as of such date.
"REVOLVING CREDIT LOAN A BORROWING BASE" means the Borrowing Base
relating to Revolving Credit Loan A, all as further described in the EXIMBANK
Financing Documents.
"REVOLVING CREDIT LOAN B BORROWING BASE" means at any time an amount
equal to the sum of:
(a) Eighty Percent (80%) (or such lesser percentage as the
Lender may in its sole but reasonable discretion determine from time to
time) of the face value of Eligible Receivables due and owing at such time
(the "RECEIVABLE COMPONENT"), PLUS
(b) The least of (i) Fifty Percent (50%) (or such lesser
percentage as the Lender may in its sole but reasonable discretion
determine from time to time) of the lesser of cost or market value
(computed on a first-in-first-out basis) of Eligible Inventory at such
time; (ii) One Million, Three Hundred Thousand and No/100 Dollars
($1,300,000.00); and (iii) the Receivable Component, LESS
(c) Outstanding Letter of Credit Obligations for Letters of
Credit issued pursuant to SECTION 2C.1(A).
"REVOLVING CREDIT NOTES" means collectively Revolving Credit Note A
and Revolving Credit Note B.
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"REVOLVING CREDIT NOTE A" means the promissory note made by the
Borrower payable to the order of the Lender evidencing the obligation of the
Borrower to pay the aggregate unpaid principal amount of Revolving Credit Loan A
made to it by the Lender in connection with the EXIMBANK Financing Documents.
"REVOLVING CREDIT NOTE B" means the promissory note made by the
Borrower payable to the order of the Lender evidencing the obligation of the
Borrower to pay the aggregate unpaid principal amount of Revolving Credit Loan B
made to it by the Lender (and any promissory note or notes that may be issued
from time to time in substitution, renewal, extension, replacement or exchange
therefor, whether payable to the Lender or a different lender, whether issued in
connection with a Person becoming a lender after the Effective Date or
otherwise), substantially in the form of EXHIBIT A-2 hereto, with all blanks
properly completed.
"SCHEDULE OF EQUIPMENT" means a schedule delivered by the Borrower
to the Lender pursuant to the provisions of SECTION 7.14(C).
"SCHEDULE OF INVENTORY" means a schedule delivered by the Borrower
to the Lender pursuant to the provisions of SECTION 7.14(B).
"SCHEDULE OF RECEIVABLES" means a schedule delivered by the Borrower
to the Lender pursuant to the provisions of SECTION 7.14(A).
"SECURED OBLIGATIONS" means, in each case whether now in existence
or hereafter arising, (a) the principal of and interest and premium, if any, on
the Loans, and (b) all indebtedness, liabilities, obligations, overdrafts,
covenants and duties of the Borrower to the Lender or any Affiliate of the
Lender of every kind, nature and description, direct or indirect, absolute or
contingent, due or not due, contractual or tortious, liquidated or unliquidated,
and whether or not evidenced by any note and whether or not for the payment of
money under or in respect of this Agreement, any Note or any of the other Loan
Documents, including without limitation any Interest Rate Protection Agreements
or similar arrangements.
"SECURITY DOCUMENTS" means each of (a) the Financing Statements, and
(b) each other writing executed and delivered by any Person securing the Secured
Obligations or evidencing such security.
"SECURITY INTEREST" means the Liens of the Lender on and in the
Collateral effected hereby or by any of the Security Documents or pursuant to
the terms hereof or thereof.
"SUBORDINATED INDEBTEDNESS" means (a) Indebtedness evidenced by the
Subordinated Notes which is subordinated to the Secured Obligations as set forth
in the Subordination Agreements, and (b) any other Indebtedness for Money
Borrowed of the Borrower which is subordinated to the Secured Obligations on
terms and conditions acceptable to the Lender in its sole discretion.
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"SUBORDINATED NOTES" means those certain promissory notes in the
form of EXHIBIT C attached hereto, with respect to which the outstanding
principal balances as of the Effective Date are set forth on SCHEDULE 5.1(I)
attached hereto.
"SUBORDINATION AGREEMENTS" means the subordination agreements, in
form and substance acceptable to the Lender, pursuant to which the Indebtedness
evidenced by the Subordinated Notes is subordinated to the Secured Obligations.
"SUBSIDIARY" when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of the stock
of any class or classes or 50% or more of other ownership interests is owned of
record or beneficially by such other Person or by one or more Subsidiaries of
such other Person or by such other Person and one or more Subsidiaries of such
Person, (i) if the holders of such stock or other ownership interests (A) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote has been suspended
by the happening of such a contingency, or (B) are entitled, as such holders, to
vote for the election of a majority of the directors (or individuals performing
similar functions) of such Person, whether or not the right so to vote exists by
reason of the happening of a contingency, or (ii) in the case of such other
ownership interests, if such ownership interests constitute a majority voting
interest.
"TANGIBLE NET WORTH" means, as applied to any Person, the Net Worth
of such Person at the time in question, after deducting therefrom the amount of
all intangible items reflected therein, including all unamortized debt discount
and expense, unamortized research and development expense, unamortized deferred
charges, goodwill, Intellectual Property, unamortized excess cost of investment
in Subsidiaries over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP PLUS
Subordinated Indebtedness.
"TERM LOAN A" means the loan made to the Borrower pursuant to
SECTION 2B.1(a).
"TERM LOAN B" means the loan made to the Borrower pursuant to
SECTION 2B.2(c).
"TERM LOANS" means collectively Term Loan A and Term Loan B.
"TERM NOTE A" means the Term Note made by the Borrower payable to
the order of the Lender evidencing the obligation of the Borrower to pay the
aggregate unpaid principal amount of the Term Loan A made to it by the Lender
(and any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor, whether
payable to the Lender or a different lender, whether issued in connection with a
Person becoming a lender after the Effective Date or otherwise), substantially
in the form of EXHIBIT A-3 hereto, with all blanks properly completed.
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"TERM NOTE B" means the Term Note made by the Borrower payable to
the order of the Lender evidencing the obligation of the Borrower to pay the
aggregate unpaid principal amount of the Term Loan B made to it by the Lender
(and any promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor, whether
payable to the Lender or a different lender, whether issued in connection with a
Person becoming a lender after the Effective Date or otherwise), substantially
in the form of EXHIBIT A-4 hereto, with all blanks properly completed.
"TERM NOTES" means collectively Term Note A and Term Note B.
"TERMINATION DATE" means the earlier of August 8, 2001 or such later
date to which the termination of the Revolving Credit Facility shall be extended
pursuant to SECTION 2A.5.
"TERMINATION EVENT" means, with respect to any Benefit Plan subject
to Title IV of ERISA, (a) a "Reportable Event" as defined in Section 4043(b)of
ERISA, but excluding any such event as to which the provision for 30 days'
notice to the PBGC is waived under applicable regulations, (b) the filing of a
notice of intent to terminate a Benefit Plan or the treatment of a Benefit Plan
amendment as a termination under Section 4041 of ERISA, or (c) the institution
of proceedings to terminate a Benefit Plan by the PBGC under Section 4042 of
ERISA or the appointment of a trustee to administer any Benefit Plan.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Kansas.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures which are
paid for by a Person other than with the proceeds of Indebtedness for Money
Borrowed (other than the Loans) incurred to finance such Capital Expenditures
and other than those represented by Capitalized Lease Obligations.
"UNFUNDED VESTED ACCRUED BENEFITS" means, with respect to any
Benefit Plan subject to Title IV of ERISA at any time, the amount (if any) by
which (a) the present value of all vested nonforfeitable benefits under such
Benefit Plan exceeds (b) the fair market value of all Benefit Plan assets
allocable to such benefits, as determined using such reasonable actuarial
assumptions and methods as are specified in the Schedule B (Actuarial
Information) to the most recent Annual Report (Form 5500) filed with respect to
such Benefit Plan.
Section 1.2 OTHER REFERENTIAL PROVISIONS.
(a) All terms in this Agreement, the Exhibits and Schedules hereto
shall have the same defined meanings when used in any other Loan Documents,
unless the context shall require otherwise.
(b) Except as otherwise expressly provided herein, all accounting
terms not specifically defined or specified herein shall have the meanings
generally attributed to such terms under GAAP including, without limitation,
applicable statements and interpretations issued by
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the Financial Accounting Standards Board and bulletins, opinions,
interpretations and statements issued by the American Institute of Certified
Public Accountants or its committees.
(c) All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
(d) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement.
(e) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither limit nor
amplify the provisions of this Agreement, and all references in this Agreement
to Articles, Sections, Subsections, paragraphs, clauses, subclauses, Schedules
or Exhibits shall refer to the corresponding Article, Section, Subsection,
paragraph, clause or subclause of, or Schedule or Exhibit attached to, this
Agreement, unless specific reference is made to the articles, sections or other
subdivisions or divisions of, or to schedules or exhibits to, another document
or instrument.
(f) Each definition of a document in this Agreement shall include
such document as amended, modified, supplemented or restated from time to time
in accordance with the terms of this Agreement.
(g) Except where specifically restricted, reference to a party to a
Loan Document includes that party and its successors and assigns permitted
hereunder or under such Loan Document.
(h) Unless otherwise specifically stated, whenever a time is
referred to in this Agreement or in any other Loan Document, such time shall be
the local time in Kansas City, Missouri.
(i) Whenever the phrase "to the knowledge of the Borrower" or words
of similar import relating to the knowledge of the Borrower are used herein,
such phrase shall mean and refer to (i) the actual knowledge of the President or
chief financial officer or (ii) the knowledge that such officers would have
obtained if they had engaged in good faith in the diligent performance of their
duties, including the making of such reasonable specific inquiries as may be
necessary of the appropriate persons in a good faith attempt to ascertain the
accuracy of the matter to which such phrase relates.
(j) The terms accounts, chattel paper, documents, equipment,
instruments, general intangibles and inventory, as and when used (without being
capitalized) in this Agreement or the Security Documents, shall have the
meanings given those terms in the UCC.
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Section 1.3 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
attached hereto are by reference made a part hereof.
ARTICLE 2 - REVOLVING CREDIT FACILITY
A. REVOLVING CREDIT FACILITY
Section 2A.1 REVOLVING CREDIT LOANS.
(a) REVOLVING CREDIT LOAN A. Terms and conditions of Revolving
Credit Loan A shall be governed by the EXIMBANK Financing Documents.
(b) REVOLVING CREDIT LOAN B. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, the Lender shall make Revolving Credit Loans to the
Borrower from time to time from the Effective Date to the Termination Date, as
requested by the Borrower in accordance with the terms of SECTION 2A.3, in an
aggregate principal amount outstanding not to exceed at any time the LEAST OF
(a) Three Million and No/100 Dollars ($3,000,000.00); (b) the Revolving Credit
Loan B Borrowing Base and (c) an amount which, when added to the
then-outstanding balance of Revolving Credit Loan A would exceed the Revolving
Credit Facility. It is expressly understood and agreed that the Lender may and
at present intends to use the lesser of the amounts referred to in the foregoing
SUBCLAUSES (A) and (B) as a maximum ceiling on Revolving Credit Loan B;
PROVIDED, HOWEVER, that it is agreed that should Revolving Credit Loan B exceed
the ceiling so determined or any other limitation set forth in this Agreement,
such Revolving Credit Loan B shall nevertheless constitute Secured Obligations
and, as such, shall be entitled to all benefits thereof and security therefor.
The principal amount of any Revolving Credit Loan B which is repaid may be
reborrowed by the Borrower in accordance with the terms of this SECTION 2A.1(b).
The Lender is hereby authorized to record each repayment of principal of
Revolving Credit Loan B in its books and records, such books and records
constituting PRIMA FACIE evidence of the accuracy of the information contained
therein. All Revolving Credit Loans made pursuant to this SECTION 2A.1(b) are
collectively referred to as "REVOLVING CREDIT LOAN B."
Section 2A.2 MANNER OF BORROWING REVOLVING CREDIT LOAN A.
Borrowings of Revolving Credit Loan A shall be made in accordance with the
provisions of the EXIMBANK Financing Documents.
Section 2A.3 MANNER OF BORROWING REVOLVING CREDIT LOAN B.
Borrowings of the Revolving Credit Loan B shall be made as follows:
(a) REQUESTS FOR BORROWING. A request for an advance on
Revolving Credit Loan B shall be made, or shall be deemed to be made, in
the following manner:
(i) the Borrower may request an advance on Revolving
Credit Loan B by notifying the Lender at Lender's Office as
designated herein, before 1:30 p.m. (Kansas City, Missouri local
time) on the proposed borrowing date, of
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its intention to borrow, specifying the effective date and amount of
such proposed Revolving Credit Loan;
(ii) whenever a check is presented to the Lender for
payment against the Disbursement Account in an amount greater than
the then available balance in such account, such presentation shall
be deemed to be a request for an advance on Revolving Credit Loan B
on the date of such notice in an amount equal to the excess of such
check over such available balance, and such request shall be
irrevocable;
(iii) unless payment is otherwise made by the Borrower,
the becoming due of any amount required to be paid under this
Agreement or any of the Notes as interest shall be deemed to be a
request for an advance on Revolving Credit Loan B on the due date in
the amount required to pay such interest, and such request shall be
irrevocable; and
(iv) unless payment is otherwise made by the Borrower,
the maturity of any Secured Obligation required to be paid shall be
deemed to be a request for an advance on Revolving Credit Loan B on
the due date in the amount required to pay such Secured Obligation,
and such request shall be irrevocable.
(b) NOTICE OF BORROWING. Any request for an advance on
Revolving Credit Loan B under SECTION 2A.3(a)(i) (a "NOTICE OF Borrowing")
shall be made by telephone or in writing (including telecopy) and, in the
case of any telephonic notice, shall be immediately followed by a written
confirmation thereof in a form acceptable to the Lender, PROVIDED that the
failure to provide written confirmation shall not invalidate any
telephonic notice and, if such written confirmation differs in any respect
from the action taken by the Lender, the records of the Lender shall
control absent manifest error.
(c) DISBURSEMENT OF LOANS. The Borrower hereby irrevocably
authorizes the Lender to disburse the proceeds of each borrowing
requested, or deemed to be requested, pursuant to this SECTION 2A.3 as
follows: (i) the proceeds of each borrowing requested under SECTION
2A.3(a)(i) or SECTION 2A.3(a)(ii) shall be disbursed by the Lender in
lawful money of the United States of America in immediately available
funds, (A) in the case of the initial borrowing, in accordance with the
terms of the written instructions from the Borrower to the Lender, and (B)
in the case of each subsequent borrowing, by credit to the Disbursement
Account or to such other account as may be agreed upon by the Borrower and
the Lender from time to time; and (ii) the proceeds of each borrowing
requested under SECTION 2A.3(a)(iii) OR SECTION 2A.3(a)(iv) shall be
disbursed by the Lender by way of direct payment of the relevant
principal, interest or other Secured Obligation, as the case may be.
Section 2A.4 REPAYMENT OF REVOLVING CREDIT LOANS.
The Revolving Credit Loans will be repaid as follows: (a) whether or
not any Default or Event of Default has occurred, the outstanding principal
amount of all the Revolving Credit Loans is due and payable, and shall be repaid
by the Borrower in full together with
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accrued and unpaid interest on the amount repaid to the date of repayment, on
the Termination Date; (b) if at any time the aggregate unpaid principal amount
of the Revolving Credit Loans then outstanding exceeds the lesser of (i) the
Revolving Credit Facility or (ii) the respective amounts permitted to be
advanced to Borrower pursuant to the Available Commitment (as defined in the
EXIMBANK Documents, with respect to Revolving Credit Loan A) and SECTION 2A.1(b)
hereof (with respect to Revolving Credit Loan B), the Borrower shall repay such
Revolving Credit Loans (or Revolving Credit Loan A or B, as the case may be) in
an amount sufficient to reduce the aggregate unpaid principal amount of such
Loans by an amount equal to such excess, together with accrued and unpaid
interest on the amount repaid to the date of repayment; and (c) the Borrower
hereby instructs the Lender to repay the Revolving Credit Loans outstanding on
any day in an amount equal to the amount received by the Lender on such day
pursuant to SECTION 7.1(b).
Section 2A.5 REVOLVING CREDIT NOTES.
The Revolving Credit Loans and the obligation of the Borrower to
repay such Loans shall also be evidenced by Revolving Credit Note A and
Revolving Credit Note B payable to the order of the Lender. Such Notes shall be
dated the Effective Date and be duly and validly executed and delivered by the
Borrower, and shall be in form substantially similar to EXHIBIT A-1 and EXHIBIT
A-2 respectively, attached hereto.
B. TERM LOAN FACILITY
Section 2B.1 TERM LOANS.
(a) TERM LOAN A. Upon the terms and subject to the conditions of,
and in reliance upon the representations and warranties made under this
Agreement, the Lender agrees to make the Term Loan A to the Borrower on the
Effective Date in the amount of Three Hundred Twenty-Eight Thousand and No/100
Dollars ($328,000.00). The Lender will fund Term Loan A in order to pay off in
full, the second lien on the Olathe Property held by the Small Business
Administration in the approximate amount of $163,000.00 ("SBA Loan"). Until such
time as the SBA Loan is paid in full, Borrower will continue to make all
required payments on the SBA Loan. Concurrently with the payment in full of the
SBA Loan, Borrower will execute and deliver to Lender, an amendment to Lender's
existing first mortgage on the Olathe Property to reflect the new principal
amount of Three Hundred Twenty-Eight Thousand and No/100 Dollars ($328,000.00),
and Term Note A will be deemed delivered as an amendment and restatement of the
promissory note underlying Lender's first mortgage on the Olathe Property.
(b) TERM LOAN B. Upon the terms and subject to the conditions of,
and in reliance upon the representations and warranties made under this
Agreement, the Lender agrees to make the Term Loan B to the Borrower on the
Effective Date in the amount of Eight Hundred Fifty Thousand and No/100 Dollars
($850,000.00).
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Section 2B.2 MANNER OF BORROWING AND DISBURSING TERM LOANS.
The Borrower shall give the Lender at least two Business Days' prior
written notice of the occurrence of the Effective Date. On the Effective Date,
upon satisfaction of the applicable conditions set forth in SECTIONS 4.1 and
4.2, the Lender will disburse the Term Loans in same day funds in accordance
with the terms of the written instructions from the Borrower to the Lender.
Section 2B.3 REPAYMENT OF TERM LOANS.
(a) REPAYMENT OF TERM LOAN A. The Term Loan A is due and payable and
shall be repaid in full by the Borrower in consecutive equal installments of
principal in the amount of $3,793.54 commencing April 15, 2000 on
successive Installment Payment Dates; provided that the final installment
payable on March 15, 2001 shall be in the amount of the then unpaid balance of
Term Loan A together with any unpaid interest thereon. Interest on Term Loan A
shall be paid monthly in accordance with Section 3.1 below.
(b) REPAYMENT OF TERM LOAN B. The Term Loan B is due and payable and
shall be repaid in full by the Borrower in consecutive equal installments of
principal in the amount of $27,128.78 commencing March 15, 2000 on
successive Installment Payment Dates; provided that the final installment
payable on February 15, 2003 shall be in the amount of the then unpaid balance
of Term Loan A together with any unpaid interest thereon. Interest on Term Loan
B shall be paid monthly in accordance with Section 3.1 below.
Section 2B.4 TERM NOTES.
The Term Loans and the obligation of the Borrower to repay such Term
Loans shall be evidenced by a Term Note payable to the order of the Lender for
each of Term Loan A and Term Loan B. Such Notes shall be dated the Effective
Date and be duly and validly executed and delivered by the Borrower, and shall
be in form substantially similar to EXHIBIT A-3 and EXHIBIT A-4 respectively,
attached hereto.
Section 2B.5 MANDATORY PREPAYMENT OF TERM LOANS.
Any and all amounts received by the Borrower as proceeds from the
sale of any Equipment to the extent such proceeds exceed (i) $5,000 in the case
of any single item of Equipment, or (ii) $10,000 in the aggregate for all such
Equipment sold during any twelve-month period, shall be paid, immediately upon
receipt by the Borrower, to the Lender, and shall be applied to the principal
installments of the Term Loans (in the sole discretion of Lender as to whether
such payment is applied to Term Loan A or Term Loan B, or a combination of both)
in the inverse order of their maturities. On the prepayment date, the Borrower
shall pay interest on the amount prepaid, accrued to the prepayment date. The
Borrower shall also be obligated to prepay either or both of the Term Loans (as
Lender may elect in its sole discretion) in full together with accrued and
unpaid interest thereon upon any acceleration of either or both of the Term
Loans, as applicable, pursuant to ARTICLE 11.
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C. LETTER OF CREDIT FACILITY
Section 2C.1 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, and the
Loan Documents, during the term of this Agreement, Lender will, absent the
existence of a Default or Event of Default, from time to time cause the issuance
of, upon Borrower's request, Letters of Credit; PROVIDED, that the Letters of
Credit will be in form and substance acceptable to Lender in its sole
discretion; and PROVIDED FURTHER, that no Letter of Credit will have an
expiration date (i) more than eighteen (18) months from the date of issuance or
(ii) beyond six (6) months after the Termination Date. Borrower's reimbursement
obligation in respect of the Letters of Credit will automatically reduce, dollar
for dollar, the Revolving Credit Loan B Borrowing Base. Any payment made by
Lender to any Person on account of any Letter of Credit will constitute a
Revolving Credit Loan hereunder, to be applied against Revolving Credit Loan B.
At no time will the aggregate sum of direct Revolving Credit Loans by Lender to
Borrower PLUS the outstanding Letter of Credit Obligations exceed the lesser of
the Revolving Credit Facility or the Borrowing Base.
(b) The Lender will cause to remain in place, the Bond Letter of
Credit, more particularly described as Letter of Credit No. 972771, dated
September 15, 1998 in favor of UMB Bank, as trustee in the amount of
$2,599,572.60. Any payment made by Lender to any Person on account of the Bond
Letter of Credit, including without limitation the monthly interest draws will
charged against ASI's operating account (Bank of America Account #332200008673)
(the "OPERATING ACCOUNT") to the extent of sufficient funds therein. Any payment
made by Lender to any Person on account of the Bond Letter of Credit will
constitute a Revolving Credit Loan hereunder, to be applied against Revolving
Credit Loan B. Except as otherwise provided herein, the Letter of Credit and
Reimbursement Agreement dated as of September 1, 1998 by and among Lender, KHC
of Lenexa, LLC and DCI, Inc. ("REIMBURSEMENT AGREEMENT") will remain in full
force and effect. Notwithstanding the above, the Borrower agrees to execute any
amendment to or modification of the Reimbursement Agreement reasonably required
by the Lender in order to conform the terms of the Reimbursement Agreement to
the terms of this Agreement.
ARTICLE 3 - GENERAL LOAN PROVISIONS
Section 3.1 INTEREST.
(a) (i) REVOLVING CREDIT LOANS. The Borrower will pay interest on
the unpaid principal amount of each Revolving Credit Loan for each day
from the day such Loan was made until such Loan is paid (whether at
maturity, by reason of acceleration or otherwise), at a rate per annum
equal to the Prime Rate PLUS one-half of one percent (0.5%), payable
monthly in arrears on each Interest Payment Date and on the Termination
Date.
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(ii) TERM LOANS. The Borrower will pay interest on each Term
Loan at a rate per annum equal to the Prime Rate PLUS one-half of
one-percent (0.5%) payable in arrears on each Interest Payment Date and
when such Term Loans are due (whether at maturity, by reason of
acceleration or otherwise).
(b) The Borrower shall pay interest on the unpaid principal amount
of each Secured Obligation other than a Loan for each day from the day such
Secured Obligation becomes due and payable until such Secured Obligation is paid
at the rate per annum applicable to Revolving Credit Loans, payable on demand.
(c) From and after the occurrence of an Event of Default, the unpaid
principal amount of each Secured Obligation shall bear interest until paid in
full (or, if earlier, until such Event of Default is cured or waived in writing
by the Lender) at a rate per annum equal to the Default Margin plus the rate
otherwise in effect under SECTION 3.1(a) or (b), payable on demand. The interest
rate provided for in this SECTION 3.1(c) shall to the extent permitted by
applicable law apply to and accrue on the amount of any judgment entered with
respect to any Secured Obligation and shall continue to accrue at such rate
during any proceeding described in SECTION 11.1(g) or (h).
(d) The interest rates provided for in SECTIONS 3.1(a), (b) and (c)
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed.
(e) It is not intended by the Lender, and nothing contained in this
Agreement or any Note shall be deemed, to establish or require the payment of a
rate of interest in excess of the maximum rate permitted by applicable law (the
"MAXIMUM RATE"). If, in any month, the Effective Interest Rate, absent such
limitation, would have exceeded the Maximum Rate, then the Effective Interest
Rate for that month shall be the Maximum Rate, and if, in future months, the
Effective Interest Rate would otherwise be less than the Maximum Rate, then the
Effective Interest Rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In this
connection, in the event that, upon payment in full of the Secured Obligations,
the total amount of interest paid or accrued under the terms of this Agreement
is less than the total amount of interest which would have been paid or accrued
if the Effective Interest Rate had at all times been in effect, then the
Borrower shall, to the extent permitted by applicable law, pay to the Lender an
amount equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged if the Maximum Rate had, at all times,
been in effect and (B) the amount of interest which would have accrued had the
Effective Interest Rate, at all times, been in effect, and (ii) the amount of
interest actually paid or accrued under this Agreement. In the event the Lender
receives, collects or applies as interest any sum in excess of the Maximum Rate,
such excess amount shall be applied to the reduction of the principal balance of
the applicable Secured Obligation, and, if no such principal is then
outstanding, such excess or part thereof remaining shall be paid to the
Borrower.
Section 3.2 FEES.
(a) UNUSED LINE FEE. In connection with and as consideration for the
Lender's commitment hereunder, subject to the terms hereof, to lend to the
Borrower under the
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Revolving Credit Facility, the Borrower shall pay a fee to the Lender, from the
Effective Date until the Termination Date, in an amount equal to one quarter of
one percent (.25%) per annum of the average daily unused portion of the
Revolving Credit Facility, payable quarterly in arrears on the first day of each
quarter and on the date of any permanent reduction in the Revolving Credit
Facility.
(b) COMMITMENT FEE. Borrower will pay Lender a commitment fee
of $45,000 at closing, which shall be deemed fully earned upon execution of
this Agreement by Borrower and Lender.
(c) EXIMBANK FEES. Borrower will pay certain fees as described
in the EXIMBANK Financing Documents.
(d) FIELD EXAM FEES. Borrower will pay all of the reasonable
examination fees, costs and expenses incurred by Lender in connection with
periodic field examinations of Borrower's business operation and financial
records and Collateral. Unless a Default or Event of Default has occurred,
Lender will conduct field examinations no more frequently than once every six
(6) months.
(e) LETTER OF CREDIT FEES.
(1) With respect to all Letters of Credit except the Bond
Letter of Credit, Borrower will pay to Lender, upon issuance of such Letter of
Credit, a Letter of Credit fee equal to the maximum face duration of the Letter
of Credit in years (provided, however, that the minimum deemed face duration of
any Letter of Credit shall be 1/12th of one year) MULTIPLIED BY one and
one-quarter percent (1.25%) of the maximum obligation of the Lender under the
Letter of Credit;
(2) With respect to the Bond Letter of Credit, Borrower will
pay to Lender, upon issuance of the Bond Letter of Credit and annually upon each
anniversary of the issuance of the Bond Letter of Credit (prorated in the event
the Bond Letter of Credit is to expire prior to the next such anniversary), a
Letter of Credit fee equal to one and one-quarter percent (1.25%) of the maximum
obligation of the Lender under the Bond Letter of Credit;
(f) GENERAL. All fees shall be fully earned by the Lender when due
and payable and, except as otherwise set forth herein, shall not be subject to
refund or rebate. All fees are for compensation for services and are not, and
shall not be deemed to be, interest or a charge for the use of money.
Section 3.3 INCREASED COSTS AND REDUCED RETURNS.
The Borrower agrees that if any law now or hereafter in effect and
whether or not presently applicable to the Lender or any guideline or directive
of any Governmental Authority (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) or the
interpretation or administration thereof by any Governmental Authority, shall
either (a)(i) impose, affect, modify or deem applicable any reserve, special
deposit, capital
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maintenance or similar requirement against any Loan, (ii) impose on the Lender
any other condition regarding any Loan, this Agreement, the Notes or the
facilities provided hereunder, or (iii) result in any requirement regarding
capital adequacy (including any risk-based capital guidelines) affecting the
Lender being imposed or modified or deemed applicable to the Lender, or (b)
subject the Lender to any taxes on the recording, registration, notarization or
other formalization of the Loans or the Notes, and the result of any event
referred to in CLAUSE (A) or (B) above shall be to increase the cost to the
Lender of making, funding or maintaining any Loan or to reduce the amount of any
sum receivable by the Lender or the Lender's rate of return on capital with
respect to any Loan to a level below that which the Lender could have achieved
but for such imposition, modification or deemed applicability (taking into
consideration the Lender's policies with respect to capital adequacy) by an
amount deemed by Lender (in the exercise of its discretion) to be material,
then, upon demand by the Lender, the Borrower shall immediately pay to the
Lender additional amounts which shall be sufficient to compensate the Lender for
such increased cost, tax or reduced rate of return. A certificate of the Lender
to the Borrower claiming compensation under this SECTION 3.3 shall be final,
conclusive and binding on all parties for all purposes in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or amounts to be paid to
it hereunder, and the method by which such amounts were determined. In
determining such amount, the Lender may use any reasonable averaging and
attribution methods.
Section 3.4 MANNER OF PAYMENT.
(a) Each payment (including prepayments) by the Borrower on account
of the principal of or interest on the Loans or of any fee or other amounts
payable to the Lender under this Agreement or any Note shall be made not later
than 1:30 p.m. on the date specified for payment under this Agreement (or if
such day is not a Business Day, the next succeeding Business Day) to the Lender
at the Lender's Office, in Dollars, in immediately available funds and shall be
made without any setoff, counterclaim or deduction whatsoever.
(b) The Borrower hereby irrevocably authorizes the Lender and each
Affiliate of the Lender to charge any account of the Borrower maintained with
the Lender or such Affiliate with such amounts as may be necessary from time to
time to pay any Secured Obligations which are not paid when due.
Section 3.5 TERMINATION OF AGREEMENT.
(a) On the Termination Date, the Borrower shall pay to the Lender,
in same day funds, an amount equal to the aggregate amount of all Loans
outstanding on such date, together with accrued interest thereon, all fees
payable pursuant to SECTION 3.2 accrued from the date last paid through the
effective date of termination, any amounts payable to the Lender pursuant to the
other provisions of this Agreement, including, without limitation, SECTIONS 3.3,
11.2, 12.12 and 12.13, any and all other Secured Obligations then outstanding
and provide the Lender with an indemnification agreement in form and substance
satisfactory to the Lender with respect to returned and dishonored items and
such other matters as the Lender shall require. Borrower may terminate this
Agreement at any time prior to the Termination Date by paying all of the
outstanding Loans in full together with all interest, fees, costs and other
expenses required hereunder and terminating all Letters of Credit, plus a
prepayment fee of (a) two percent (2%) of
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the Maximum Credit Facility if such termination occurs on or before the last day
of the eighteenth (18th) month after the Effective Date hereof; or (b) one
percent (1%) of the Maximum Credit Facility if the Termination Date has been
extended and such termination occurs before the new Termination Date but after
the eighteenth month after the Effective Date hereof ("PREPAYMENT FEE").
(b) Provided that no Default or Event of Default has occurred and is
continuing or would occur as a result, upon the written request of the Borrower,
Lender will permit Borrower to permanently reduce Term Loan A, Term Loan B
and/or Revolving Credit Loan B ("PERMANENT REDUCTIONS") on the following
conditions: (i) all Permanent Reductions shall be in increments of not less than
Two Hundred Thousand and No/100 Dollars ($200,000.00); (ii) Permanent Reductions
shall not occur more than once in any thirty (30) day period; (iii) Permanent
Reductions shall not occur more than four (4) times during the course of the
Loan; (iv) Lender shall be under no obligation to re-lend any amount permanently
reduced pursuant to a Permanent Reduction; (v) a Permanent Reduction may not be
made which would cause an overadvance against the Revolving Credit Loan B
Borrowing Base after giving effect to such Permanent Reduction; (vi) a Permanent
Reduction will be evidenced by an amendment to this Agreement, and will not be
effective until acknowledged by Lender to Borrower in writing; (vii) a Permanent
Reduction would be supported by an equity investment into ASI in an amount
greater than or equal to the Permanent Reduction; (viii) Borrower will pay the
Permanent Reduction Prepayment Fee (as hereinafter defined) to Lender; and (ix)
Borrower will pay the actual, reasonable costs of Lender, including without
limitation legal fees and costs, incurred in connection with a Permanent
Reduction. The "PERMANENT REDUCTION PREPAYMENT FEE" is equal to (a) one and
one-third percent (1.33%) of the amount of the Permanent Reduction if such
termination occurs on or before the last day of the eighteenth (18th) month
after the Effective Date hereof; or (b) two-thirds of one percent (.67%) of the
amount of the Permanent Reduction if the Termination Date has been extended and
such termination occurs before the new Termination Date but after the eighteenth
month after the Effective Date hereof.
Section 3.6 EXISTING LOANS.
Notwithstanding anything to the contrary herein, the Loans will be
used to refinance all of the Existing Loans. In addition to other Loans and
credit accommodations contained herein, this Agreement shall constitute a
restatement of all of the Existing Loans, and except as otherwise provided
herein, Lender shall have no obligation or commitment under the Existing Loans
to provide credit to Borrower. Notwithstanding the above, the Bond Letter of
Credit and the Reimbursement Agreement in connection therewith will remain in
place as provided herein, and the Lender's Mortgage on the Olathe Property and
the Promissory Note related thereto will remain in place as provided herein.
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ARTICLE 4 - CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Initial Loan.
Notwithstanding any other provision of this Agreement, the Lender's
obligation to make the Initial Loans is subject to the fulfillment of each of
the following conditions prior to or contemporaneously with the making of such
Loan:
(a) CLOSING DOCUMENTS. The Lender shall have received each of
the following documents, all of which shall be satisfactory in form and
substance to the Lender and its counsel:
(1) this Agreement, duly executed and delivered by the
Borrower;
(2) the Notes, dated the Effective Date and duly executed
and delivered by the Borrower;
(3) certified copies of the articles of incorporation and
by-laws of the Borrower as in effect on the Effective Date;
(4) certified copies of all corporate action, including
stockholder approval, if necessary, taken by the Borrower to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents and the borrowings under this Agreement;
(5) certificates of incumbency and specimen signatures with
respect to each of the officers of the Borrower who is authorized to
execute and deliver this Agreement or any other Loan Document on behalf of
the Borrower or any document, certificate or instrument to be delivered in
connection with this Agreement or the other Loan Documents and to request
borrowings under this Agreement;
(6) a certificate evidencing the good standing of the Borrower
in the jurisdiction of its incorporation and in each other jurisdiction in
which it is qualified as a foreign corporation to transact business;
(7) the Financing Statements duly executed and delivered by
the Borrower, and evidence satisfactory to the Lender that the Financing
Statements have been filed in each jurisdiction where such filing may be
necessary or appropriate to perfect the Security Interest;
(8) mortgages or leasehold mortgages, as the case may be, for
the Lenexa Property, Olathe Property and Overland Park Property in form
and substance acceptable to Lender in its discretion, duly executed by the
appropriate parties, and evidence satisfactory to Lender that such
mortgages have been recorded in each jurisdiction where such recording may
be necessary or appropriate to perfect the Security Interest therein;
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(9) Subordination Agreements, if any, duly executed and
delivered by the holders of any Subordinated Notes and the Borrower,
together with copies of any such Subordinated Notes bearing a legend
evidencing the subordination thereof to the Secured Obligations in form
satisfactory to Lender;
(10) landlords' and mortgagees' waiver and consent agreements,
if any, duly executed on behalf of each landlord of any leased real
property on which any Collateral is located;
(11) a Schedule of Inventory and a Schedule of Equipment,
each prepared as of December 31, 1999;
(12) a Schedule of Receivables prepared as of a date not
more than 3 days in advance of the Closing Date
(13) appraisals of all Real Estate and Equipment (to the
extent required by Lender), prepared by appraisers satisfactory to the
Lender, establishing values at levels satisfactory to the Lender to
support the Loans;
(14) commitments for title insurance for the Real Property in
form and substance satisfactory to the Lender showing Lender's first lien
position on the fee interest for the Olathe Property, first lien on the
leasehold interest for the Lenexa Property and second lien on the fee
interest for the Overland Park Property;
(15) environmental reports for the Real Estate
satisfactory to Lender in its sole discretion;
(16) surveys of the Real Estate certified to Lender
satisfactory to Lender in its sole discretion;
(17) certificates or binders of insurance relating to each of
the policies of insurance covering any of the Collateral together with
loss payable clauses which comply with the terms of SECTION 7.9(B);
(18) the Assignment and Assumption Agreement ("ASSIGNMENT
AGREEMENT") among KHC of Lenexa, L.L.C., DCI, UMB Bank, N.A., as
trustee, the City of Lenexa, Kansas and the Bank, effective as of the
date hereof, duly executed and delivered by the parties thereto;
(19) the closing documentation relating to the
Acquisition;
(20) a Borrowing Base Certificate prepared as of the Effective
Date duly executed and delivered by the chief financial officer of the
Borrower;
(21) a letter from the Borrower to the Lender requesting
the Initial Loans and specifying the method of disbursement;
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(22) copies of all the financial statements referred to in
Section 5.1(m) and meeting the requirements thereof;
(23) a certificate of the President of the Borrower stating
that, to the best of his knowledge and based on an examination sufficient
to enable him to make an informed statement, (a) all of the
representations and warranties made or deemed to be made under this
Agreement are true and correct in all material respects as of the
Effective Date, both with and without giving effect to the Loans to be
made at such time and the application of the proceeds thereof, and (b) no
Default or Event of Default exists;
(24) a signed opinion of Blackwell Sanders Peper Martin LLP,
counsel for the Borrower as the Lender shall deem necessary or desirable,
opining as to such matters in connection with this Agreement as the Lender
or its counsel may reasonably request;
(25) a signed opinion of Logan Riley Carson & Kaup, L.C., Bond
Counsel, opining as to the tax-exempt status of the interest on the Bonds
as a result of the transactions contemplated by the Assignment Agreement
and as to such other matters as Lender may reasonably require;
(26) copies of each of the other Loan Documents duly executed
by the parties thereto with evidence satisfactory to the Lender and its
counsel of the due authorization, binding effect and enforceability of
each such Loan Document on each such party and such other documents and
instruments as the Lender may reasonably request;
(27) the loan documents for the EXIMBANK Financing Documents,
duly executed by the parties thereto satisfactory to Lender and EXIMBANK
in their discretion; and
(28) The stock pledge agreement in form satisfactory to
Lender, duly executed by ASI, pledging all of the stock of DCI to Lender;
(b) AVAILABILITY. The Lender shall be provided with evidence
satisfactory to it that, as of the Effective Date, after giving effect to the
Initial Loans, Revolving Credit Loan B Availability will not be less than Seven
Hundred Fifty Thousand and No/100 Dollars ($750,000.00).
(c) NO INJUNCTIONS, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit or to obtain substantial damages in respect of or which is related to
or arises out of this Agreement or the consummation of the transactions
contemplated hereby or which, in the Lender's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
(d) MATERIAL ADVERSE CHANGE. As of the Effective Date, there shall
not have occurred any change which, in the Lender's sole but reasonable
discretion, has had or would
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have a Materially Adverse Effect as compared to the condition of the Borrower
presented by the most recent unaudited financial statements of the Borrower
described in SECTION 5.1(M).
(e) SOLVENCY. The Lender shall have received evidence satisfactory
to it that, after giving effect to the Initial Loans (i) the Borrower has assets
(excluding goodwill and other intangible assets not capable of valuation) having
value, both at fair value and at present fair saleable value, greater than the
amount of its liabilities, and (ii) the Borrower's assets are sufficient in
value to provide the Borrower with sufficient working capital to enable it
profitably to operate its business and to meet its obligations as they become
due, and (iii) the Borrower has adequate capital to conduct the business in
which it is and proposes to be engaged.
(f) RELEASE OF SECURITY INTERESTS. The Lender shall have
received evidence satisfactory to it of the release and termination of all
Liens other than Permitted Liens.
(g) FINANCIAL RATIOS. All financial ratios described in this
Agreement are being met as of the Effective Date after giving effect to the
Initial Loans.
Section 4.2 ALL LOANS.
At the time of making of each Loan, including the Initial Loan:
(a) all of the representations and warranties made or deemed to be
made under this Agreement shall be true and correct in all material respects at
such time both with and without giving effect to the Loans to be made at such
time and the application of the proceeds thereof, except that representations
and warranties which, by their terms, are applicable only to the Effective Date
shall be required to be true and correct only as of the Effective Date,
(b) the corporate actions of the Borrower referred to in SECTION
4.1(a)(4) shall remain in full force and effect and the incumbency of officers
shall be as stated in the certificates of incumbency delivered pursuant to
SECTION 4.1(a)(5) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Lender, and
(c) the Lender may, without waiving either condition, consider the
conditions specified in SECTIONS 4.2(a) and (b) fulfilled and a representation
by the Borrower to such effect made if no written notice to the contrary is
received by the Lender from the Borrower prior to the making of the Loans then
to be made.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 5.1 REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. The Borrower is a
corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and
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authorized to do business in each jurisdiction in which failure to be so
qualified and authorized would have a Materially Adverse Effect. The
jurisdictions in which the Borrower is qualified to do business as a foreign
corporation are listed on SCHEDULE 5.1(a).
(b) SUBSIDIARIES AND OWNERSHIP OF THE BORROWER. The Borrower has no
Subsidiaries, except those set forth on SCHEDULE 5.1(b)-1. The outstanding stock
of the Borrower has been duly and validly issued and is fully paid and
nonassessable by the Borrower and the number and owners of such shares of
capital stock of the Borrower are set forth on SCHEDULE 5.1(b)-2.
(c) AUTHORIZATION OF AGREEMENT, NOTES, MORTGAGES, LOAN DOCUMENTS AND
BORROWING. The Borrower has the right and power and has taken all necessary
action to authorize it to execute, deliver and perform this Agreement and each
of the other Loan Documents to which it is a party in accordance with their
respective terms and to borrow hereunder. This Agreement and each of the other
Loan Documents to which it is a party have been duly executed and delivered by
the duly authorized officers of the Borrower and each is, or when executed and
delivered in accordance with this Agreement will be, a legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms, except as
enforceability may be limited by laws relating to bankruptcy, insolvency and
other laws effecting creditors' rights generally and by general equitable
principles.
(d) COMPLIANCE OF AGREEMENT, NOTES, MORTGAGES, LOAN DOCUMENTS AND
BORROWING WITH LAWS, ETC. The execution, delivery and performance of this
Agreement and each of the other Loan Documents to which the Borrower is a party
in accordance with their respective terms and the borrowings hereunder do not
and will not, by the passage of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any
applicable law relating to the Borrower or any of its Affiliates,
(ii) conflict with, result in a breach of or constitute a
default under (A) the articles or certificate of incorporation or by-laws
of the Borrower, (B) any indenture, material agreement or other material
instrument to which the Borrower is a party or by which any of its
property is bound or (C) any Governmental Approval relating to the
Borrower, or,
(iii) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter acquired
by the Borrower other than the Security Interest.
(e) BUSINESS. The Borrower is engaged principally in the
business described on SCHEDULE 5.1(e).
(f) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. Except as set forth
in SCHEDULE 5.1(f), the Borrower (i) has all Governmental Approvals, including
permits relating to federal, state and local Environmental Laws, ordinances and
regulations required by any
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applicable law for it to conduct its business, each of which is in full force
and effect, is final and not subject to review on appeal and is not the subject
of any pending or, to the knowledge of the Borrower, threatened attack by direct
or collateral proceeding, and (ii) is in compliance with each Governmental
Approval applicable to it and in compliance with all other applicable laws
relating to it, including, without being limited to, all Environmental Laws and
all occupational health and safety laws applicable to the Borrower or its
properties, except for instances of noncompliance which would not, singly or in
the aggregate, cause a Default or Event of Default or have a Materially Adverse
Effect and in respect of which adequate reserves have been established on the
books of the Borrower.
(g) TITLES TO PROPERTIES. Except as set forth in SCHEDULE 5.1(g),
the Borrower has good and marketable title to or a valid leasehold interest in
all its real estate and valid and legal title to or a valid leasehold interest
in all personal property and assets used in or necessary to the conduct of the
Borrower's business, including, but not limited to, those reflected on the
balance sheet of the Borrower delivered pursuant to SECTION 5.1(m)(ii).
(h) LIENS. Except as set forth in SCHEDULE 5.1(h), none of the
properties and assets of the Borrower is subject to any Lien, except Permitted
Liens. Other than the Financing Statements, no financing statement under the
Uniform Commercial Code of any state which names the Borrower as debtor and
which has not been terminated has been filed in any state or other jurisdiction,
and the Borrower has not signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens listed in SCHEDULE 5.1(h) and Permitted
Liens.
(i) INDEBTEDNESS AND GUARANTIES. Set forth on SCHEDULE 5.1(i) is a
complete and correct listing of all of the Borrower's (i) Indebtedness for Money
Borrowed and (ii) Guaranties. The Borrower is not in default of any material
provision of any agreement evidencing or relating to such any such Indebtedness
or Guaranty. Excepting the Existing Loans described on EXHIBIT E, the Loans
contemplated herein and otherwise as provided on SCHEDULE 5.1(i), there are no
Existing Loans outstanding.
(j) LITIGATION. Except as set forth on SCHEDULE 5.1(j), there are no
actions, suits or proceedings pending (nor, to the knowledge of the Borrower,
are there any actions, suits or proceedings threatened, nor is there any basis
therefor) against or, to the knowledge of the Borrower, in any other way
relating adversely to or affecting the Borrower or any of its property in any
court or before any arbitrator of any kind or before or by any governmental
body.
(k) TAX RETURNS AND PAYMENTS. Except as set forth on SCHEDULE
5.1(k), all United States federal, state and local and foreign national,
provincial and local and all other tax returns of the Borrower required by
applicable law to be filed have been duly filed, and all United States federal,
state and local and foreign national, provincial and local and all other taxes,
assessments and other governmental charges or levies upon the Borrower and its
property, income, profits and assets which are due and payable have been paid,
except any such nonpayment which is at the time permitted under SECTION 8.4. The
charges, accruals and reserves on the books of the Borrower in respect of United
States federal, state and local taxes and foreign national, provincial and local
taxes for all fiscal years and portions thereof since the
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organization of the Borrower are in the judgment of the Borrower adequate, and
the Borrower knows of no reason to anticipate any additional assessments for any
of such years which, singly or in the aggregate, might have a Materially Adverse
Effect.
(l) BURDENSOME PROVISIONS. The Borrower is not a party to any
indenture, agreement, lease or other instrument, or subject to any charter or
corporate restriction, Governmental Approval or applicable law, compliance with
the terms of which might have a Materially Adverse Effect.
(m) FINANCIAL STATEMENTS. Borrower has furnished to the Lender a
copy of (i) its audited balance sheet as at April 30, 1999 (as to ASI) and its
unaudited balance sheet as at December 31, 1998 (as to DCI) and the related
statements of income, cash flow and retained earnings for the twelve-month
period then ended and (ii) its unaudited balance sheet as at December 31, 1999
(as to ASI) and November 30, 1999 (as to DCI), and the related statement of
income for the month period then ended. Such financial statements are complete
and correct and present fairly and in all material respects in accordance with
GAAP, the financial position of the Borrower as at the dates thereof and the
results of operations of the Borrower for the periods then ended. Except as
disclosed or reflected in such financial statements, the Borrower had no
material liabilities, contingent or otherwise, and there were no material
unrealized or anticipated losses of the Borrower.
(n) ADVERSE CHANGE. Since the date of the financial statements
described in CLAUSE (i) of SECTION 5.1(m), (i) no change in the business,
assets, liabilities, condition (financial or otherwise), results of operations
or business prospects of the Borrower has occurred that has had, or which
Borrower believes may have, a Materially Adverse Effect, and (ii) no event has
occurred or failed to occur which has had, or may have, a Materially Adverse
Effect.
(o) ERISA. Neither the Borrower nor any Related Company maintains or
contributes to any Benefit Plan other than those listed on SCHEDULE 5.1(o). Each
Benefit Plan is in compliance with ERISA in all material respects, and neither
the Borrower nor any Related Company has received any notice asserting that a
Benefit Plan is not in compliance with ERISA. No material liability to the PBGC
or to a Multiemployer Plan has been, or is expected by the Borrower to be,
incurred by the Borrower or any Related Company.
(p) ABSENCE OF DEFAULTS. The Borrower is not in default under its
articles or certificate of incorporation or by-laws, and no event has occurred
which has not been remedied, cured or waived (i) that constitutes a Default or
an Event of Default or (ii) that constitutes or that, with the passage of time
or giving of notice, or both, would constitute a default or event of default by
the Borrower under any material agreement (other than this Agreement) or
judgment, decree or order to which the Borrower is a party or by which the
Borrower or any of its properties is bound or which would require the Borrower
to make any payment thereunder prior to the scheduled maturity date therefor.
(q) ACCURACY AND COMPLETENESS OF INFORMATION. All written
information, reports and other papers and data produced by or on behalf of the
Borrower and furnished to the Lender were, at the time the same were so
furnished, complete and correct in all material respects
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to the extent necessary to give the recipient a true and accurate knowledge of
the subject matter, no fact is known to the Borrower which has had, or may in
the future have (so far as the Borrower can foresee), a Materially Adverse
Effect which has not been set forth in the financial statements or disclosure
delivered prior to the Effective Date, in each case referred to in SECTION
5.1(m), or in such written information, reports or other papers or data or
otherwise disclosed in writing to the Lender prior to the Effective Date. No
document furnished or written statement made to the Lender by the Borrower in
connection with the negotiation, preparation or execution of this Agreement or
any of the Loan Documents contains or will contain any untrue statement of a
fact material to the creditworthiness of the Borrower or omits or will omit to
state a material fact necessary in order to make the statements contained
therein not misleading; provided, however, that no representation is made as to
the retrospective accuracy of any pro formas, projections or forecasts (except
that no information used as a basis for such pro formas, projections or
forecasts shall be knowingly or reasonably believed by the Borrower to be
inaccurate when used).
(r) SOLVENCY. In each case after giving effect to the Indebtedness
represented by the Loans outstanding and to be incurred and the transactions
contemplated by this Agreement, the Borrower is solvent, having assets of a fair
value which exceeds the amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they become absolute
and matured, and the Borrower is able to and anticipates that it will be able to
meet its debts as they mature and has adequate capital to conduct the business
in which it is or proposes to be engaged.
(s) STATUS OF RECEIVABLES. Each Receivable reflected in the
computations included in any Borrowing Base Certificate meets the criteria
enumerated in the definition of Eligible Receivables (or Eligible Export
Receivables as the case may be), except as disclosed in such Borrowing Base
Certificate or as disclosed in a timely manner in a subsequent Borrowing Base
Certificate or otherwise in writing to the Lender.
(t) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Borrower and the books and records relating to the Receivables are located at
the address or addresses set forth on SCHEDULE 5.1(t); except as set forth
SCHEDULE 5.1(t), the Borrower has not maintained its chief executive office or
the books and records relating to any Receivables at any other address at any
time during the five years immediately preceding the Agreement Date.
(u) STATUS OF INVENTORY. All Inventory included in any Borrowing
Base Certificate delivered to the Lender pursuant to Section 7.14(d) meets the
criteria enumerated in the definition of Eligible Inventory (or Eligible Export
Inventory as the case may be), except as disclosed in such Borrowing Base
Certificate or in a subsequent Borrowing Base Certificate or as otherwise
specifically disclosed in writing to the Lender. All Inventory is in good
condition, meets all standards imposed by any governmental agency or department
or division thereof having regulatory authority over such goods, their use or
sale, and is currently either usable or saleable in the normal course of the
Borrower's business, except to the extent reserved against in the financial
statements delivered pursuant to ARTICLE 9 or as disclosed on a Schedule of
Inventory delivered to the Lender pursuant to SECTION 7.14(b). Set forth on
SCHEDULE 5.1(u) is the (i) address (including street, city, county and state) of
each facility at which Inventory is
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located, (ii) the approximate quantity in Dollars of the Inventory customarily
located at each such facility, and (iii) if the facility is leased or is a third
party warehouse or processor location, the name of the landlord or such third
party warehouseman or processor. All Inventory is located on the premises set
forth on SCHEDULE 5.1(u) or is in transit to one of such locations, except as
otherwise disclosed in writing to the Lender; the Borrower has not located
Inventory at premises other than those set forth on SCHEDULE 5.1(U) at any time
during the four months immediately preceding the Agreement Date.
(v) EQUIPMENT. All Equipment is in good order and repair in all
material respects. Set forth on SCHEDULE 5.1(v) is the (i) address (including
street, city, county and state) of each facility at which Equipment (other than
motor vehicles) is located, (ii) the approximate value of Equipment located at
such facility; and (iii) if such facility is leased, the name of the landlord.
Except as set forth on SECTION 5.1(v), within the past four (4) months no
Equipment has been located at any other location.
(w) CORPORATE AND FICTITIOUS NAMES; TRADE NAMES. Except as otherwise
disclosed on SCHEDULE 5.1(w), during the one-year period preceding the Agreement
Date, the Borrower has not been known as or used any corporate or fictitious
name other than the corporate name of the Borrower on the Effective Date. All
trade names or styles under which the Borrower sells Inventory or Equipment or
creates Receivables, or to which instruments in payment of Receivables are made
payable, are listed on SCHEDULE 5.1(w).
(x) FEDERAL REGULATIONS. The Borrower is not engaged, principally or
as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each of the quoted
terms is defined or used in Regulations G and U of the Board of Governors of the
Federal Reserve System).
(y) INVESTMENT COMPANY ACT. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" (as each of the
quoted terms is defined or used in the Investment Company Act of 1940, as
amended).
(z) EMPLOYEE RELATIONS. The Borrower is not, except as set forth on
SCHEDULE 5.1(z), party to any collective bargaining agreement nor has any labor
union been recognized as the representative of the Borrower's employees; the
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other labor disputes involving its employees or those of its Subsidiaries.
(aa) INTELLECTUAL PROPERTY. The Borrower owns or possesses all
Intellectual Property required to conduct its business as now and presently
planned to be conducted without, to its knowledge, conflict with the rights of
others, and SCHEDULE 5.1(aa) lists all Intellectual Property owned by the
Borrower.
(bb) REAL PROPERTY. Except as otherwise disclosed on SCHEDULE
5.1(bb), the Borrower does not own, lease or otherwise operate or conduct
business at or on any real property.
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(cc) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
5.1(c)(c), no environmental events or matters of any kind currently exist which
constitute a violation of an Environmental Law or which by discovery by any
Governmental Authority, notice or the passage of time would constitute a
violation of an Environmental Law is not waived or cured, and to the best of
Borrower's knowledge have ever existed on the Real Property, such environmental
matters to include without limitation, hazardous material spills or leaks,
existence of underground tanks, remediation or monitoring programs and/or
environmental investigations of any kind.
Section 5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All representations and warranties set forth in this ARTICLE 5 and
all statements contained in any certificate, financial statement or other
instrument delivered by or on behalf of the Borrower pursuant to or in
connection with this Agreement or any of the Loan Documents (including, but not
limited to, any such representation, warranty or statement made in or in
connection with any amendment thereto) shall constitute representations and
warranties made under this Agreement. All representations and warranties made
under this Agreement shall be made or deemed to be made at and as of the
Agreement Date, at and as of the Effective Date and at and as of the date of
each Loan, except that representations and warranties which, by their terms are
applicable only to one such date shall be deemed to be made only at and as of
such date. All representations and warranties made or deemed to be made under
this Agreement shall survive and not be waived by the execution and delivery of
this Agreement, any investigation made by or on behalf of the Lender or any
borrowing hereunder.
ARTICLE 6 - SECURITY INTEREST
Section 6.1 SECURITY INTEREST.
(a) To secure the payment, observance and performance of the Secured
Obligations, the Borrower hereby mortgages, pledges and assigns all of the
Collateral to the Lender for itself and as agent for any Affiliate of the Lender
and grants to the Lender for itself and as agent for any Affiliate of the Lender
a continuing security interest in, and a continuing Lien upon, all of the
Collateral.
(b) As additional security for all of the Secured Obligations, the
Borrower grants to the Lender for itself and as agent for any Affiliate of the
Lender a security interest in, and assigns to the Lender for itself and as agent
for any Affiliate of the Lender all of the Borrower's right, title and interest
in and to, any deposits or other sums at any time credited by or due from the
Lender and each Affiliate of the Lender to the Borrower, with the same rights
therein as if the deposits or other sums were credited by or due from the
Lender.
(c) Notwithstanding the foregoing grant by the Borrower of a
security interest in all of the Collateral, it is understood and agreed by the
parties hereto that the Lender shall have as security for Revolving Credit Loan
B, any Letters of Credit issued pursuant to this Agreement and the Term Loans
(i) a second and subordinate lien on the Collateral which is comprised of Export
Receivables, Export Inventory and all proceeds thereof, including all monies on
deposit from time to time in the Restricted Account (each of the capitalized
terms in this SECTION 6.1(c)
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not otherwise defined herein shall have the meaning given to them in the
EXIMBANK Financing Documents), which are subject to a first priority lien in
favor of the Lender securing Revolving Credit Loan A, and (ii) a first priority
lien on all of the other Collateral. This agreement as to lien priority shall be
binding on the successors and assigns of the parties, including without
limitation, EXIMBANK.
Section 6.2 CONTINUED PRIORITY OF SECURITY INTEREST.
(a) The Security Interest granted by the Borrower shall at all times
be valid, perfected and enforceable against the Borrower and all third parties
in accordance with the terms of this Agreement, as security for the Secured
Obligations, and the Collateral shall not at any time be subject to any Liens
that are prior to, on a parity with or junior to the Security Interest, other
than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Lender may request, so as
at all times to maintain the validity, perfection, enforceability and rank of
the Security Interest in the Collateral in conformity with the requirements of
SECTION 6.2(a) or to enable the Lender to exercise or enforce its rights
hereunder, including, but not limited to: (i) paying all taxes, assessments and
other claims lawfully levied or assessed on any of the Collateral, except to the
extent that such taxes, assessments and other claims constitute Permitted Liens,
(ii) diligently seeking to obtain, after the Agreement Date, landlords',
mortgagees' or mechanics' releases, subordinations or waivers, (iii) delivering
to the Lender, endorsed or accompanied by such instruments of assignment as the
Lender may specify, and stamping or marking in such manner as the Lender may
specify, any and all chattel paper, instruments, letters and advices of guaranty
and documents evidencing or forming a part of the Collateral, and (iv) executing
and delivering financing statements, pledges, mortgages, designations,
hypothecations, notices and assignments, in each case in form and substance
satisfactory to the Lender, relating to the creation, validity, perfection,
maintenance or continuation of the Security Interest under the UCC or other
applicable law.
(c) The Lender is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of or in the
name of the Borrower for any purpose described in SECTION 6.2(b). A carbon,
photographic or other reproduction of this Agreement or of any of the Security
Documents or of any financing statement filed in connection with this Agreement
is sufficient as a financing statement, to the extent permitted by applicable
law.
(d) The Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect the Security Interest
and shall cause its financial statements to reflect the Security Interest.
Section 6.3 RELEASE OF SECURITY INTERESTS.
So long as no Default or Event of Default has occurred, Lender will
permit a sale of, and release its Security Interest in the Overland Park
Property, provided that all net proceeds of such sale (after repayment of the
first mortgage thereon) are applied to repayment of the Secured Obligations in
the order determined by Lender in its sole discretion. So long as no
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Default or Event of Default has occurred, Lender will permit a sale of, and
release its Security Interest in the Olathe Property, provided that all net
proceeds of such sale are applied to repayment of the Secured Obligations in the
order determined by Lender in its sole discretion, but not inconsistent with the
Bond Documents.
ARTICLE 7 - COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner provided in SECTION 12.11:
Section 7.1 COLLECTION OF RECEIVABLES.
(a) At any time after a Default or Event of Default, ("BLOCKED
ACCOUNT EVENT"), upon written notice by Lender to Borrower, Borrower will cause
all moneys, checks, notes, drafts and other payments relating to or constituting
proceeds of Receivables, or of any other Collateral, to be forwarded to a Bank
of America Blocked Depository Account (the "BLOCKED ACCOUNT"), in accordance
with an account agreement relating thereto which Borrower agrees to execute, and
in particular the Borrower will (i) advise each Account Debtor to address all
remittances with respect to amounts payable on account of any Receivables to
such specified Blocked Account, and (ii) stamp all invoices relating to any such
amounts with a legend satisfactory to the Lender indicating that payment is to
be made to the Borrower via the Blocked Account. From and after the occurrence
of a Blocked Account Event, Lender may, in its sole discretion, elect to
continue the use of the Blocked Account notwithstanding that the Default or
Event of Default giving rise to the Blocked Account Event was cured or otherwise
waived.
(b) From and after such notice is given to Borrower that a Blocked
Account is required, the Borrower and the Lender shall cause all collected
balances in the Blocked Account to be applied daily (i) on account of the
Secured Obligations, as provided in SECTION 2.3(C), 11.2 and 11.3, such credits
to be entered on the first (1st) Business Day following receipt and to be
conditioned upon final payment in cash or solvent credits of the items giving
rise to them, and (ii) with respect to any balance remaining after such
application, so long as no Default or Event of Default has occurred and is
continuing, for transfer to the Disbursement Account or such other account of
the Borrower as the Borrower and the Lender may agree.
(c) Any moneys, checks, notes, drafts or other payments referred to
in CLAUSE (a) of this SECTION 7.1 which are received by or on behalf of the
Borrower will be held in trust for the Lender and will be delivered to the
Lender at the Lender's Office as promptly as possible in the exact form
received, together with any necessary endorsements.
(d) Unless and until any such notice of a requirement of a Blocked
Account is given by Lender, all Accounts Receivable may be collected directly by
the Borrower, provided that such funds are deposited into a Bank of America
commercial account.
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Section 7.2 VERIFICATION AND NOTIFICATION.
The Lender shall have the right (a) after notifying Borrower at any
time and from time to time, in the name of the Lender or in the name of the
Borrower, to verify the validity, amount or any other matter relating to any
Receivables by mail, telephone, telegraph or otherwise, and (b) after an Event
of Default, to notify the Account Debtors or obligors under any Receivables of
the assignment of such Receivables to the Lender and to direct such Account
Debtor or obligors to make payment of all amounts due or to become due
thereunder directly to the Lender and, upon such notification and at the expense
of the Borrower, to enforce collection of any such Receivables and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as the Borrower might have done.
Section 7.3 DISPUTES, RETURNS AND ADJUSTMENTS.
(a) In the event amounts due and owing under any Receivable in
excess of $50,000 are in dispute between the Account Debtor and the Borrower,
the Borrower shall provide the Lender with prompt written notice thereof.
(b) The Borrower shall notify the Lender promptly of all material
returns and credits in excess of $50,000 in respect of any Receivable, which
notice shall specify the Receivables affected.
(c) The Borrower may, in the ordinary course of business and prior
to a Default or an Event of Default, grant any extension of time for payment of
any Receivable or compromise, compound or settle the same for less than the full
amount thereof or release wholly or partly any Person liable for the payment
thereof or allow any credit or discount whatsoever thereon (an "ADJUSTMENT");
PROVIDED that (i) no Adjustment results in the reduction of more than $75,000 in
the amount payable with respect to any Receivable or of more than $200,000 with
respect to all Receivables in any fiscal year of the Borrower, and (ii) the
Lender is promptly notified of the amount of any Adjustment in excess of $10,000
for any Receivable, and the Receivable(s) affected thereby.
Section 7.4 INVOICES.
Upon the request of the Lender, the Borrower shall deliver to the
Lender, at the Borrower's expense, copies of customers' invoices or the
equivalent, original shipping and delivery receipts or other proof of delivery,
customers' statements, the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
Receivables and such other documents and information relating to the Receivables
as the Lender shall specify.
Section 7.5 DELIVERY OF INSTRUMENTS.
In the event any Receivable in an amount in excess of $10,000 is, or
Receivables in excess of $50,000 in the aggregate are, at any time evidenced by
a promissory note or notes, trade acceptance or any other instrument for the
payment of money, the Borrower will
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immediately thereafter deliver such instruments to the Lender, appropriately
endorsed to the Lender.
Section 7.6 SALES OF INVENTORY.
All sales of Inventory will be made in compliance with all
requirements of applicable law.
Section 7.7 RETURNED GOODS.
The Security Interest in the Inventory shall, without further act,
attach to the cash and non-cash proceeds resulting from the sale or other
disposition thereof and to all Inventory which is returned to the Borrower by
customers or is otherwise recovered.
Section 7.8 OWNERSHIP AND DEFENSE OF TITLE.
(a) Except for Permitted Liens, the Borrower shall at all times be
the sole owner of each and every item of Collateral and shall not create any
Lien on, or sell, lease, exchange, assign, transfer, pledge, hypothecate, grant
a security interest or security title in or otherwise dispose of, any of the
Collateral or any interest therein, except for sales of Inventory in the
ordinary course of business, for cash or on open account or on terms of payment
ordinarily extended to its customers and except as otherwise expressly
contemplated herein. The inclusion of "proceeds" of the Collateral under the
Security Interest shall not be deemed a consent by the Lender to any other sale
or other disposition of any part or all of the Collateral. Notwithstanding the
above, Borrower may sell, transfer, convey or otherwise dispose of worn out or
obsolete equipment up to an aggregate market value of $10,000 during the term of
this Agreement, upon notice to Lender; provided that, any proceeds from such
sale, transfer, conveyance or disposition will be applied to the Secured
Obligations in the order determined by Lender in its sole but reasonable
discretion. Any other such dispositions shall be made only with the prior
written consent of the Lender, which consent shall not be unreasonably withheld,
provided that, Lender may, in its sole discretion, require the proceeds of such
disposition to be applied to the Secured Obligations in the order determined by
Lender or to the purchase of replacement Equipment in which the Lender will have
the first perfected security interest.
(b) The Borrower shall defend its title in and to the Collateral and
shall defend the Security Interest in the Collateral against the claims and
demands of all Persons.
(c) In addition to, and not in derogation of, the foregoing and the
requirements of any of the Security Documents, the Borrower shall (i) protect
and preserve all properties material to its business, including Intellectual
Property and maintain all tangible property in good and workable condition in
all material respects, with reasonable allowance for wear and tear, and (ii)
from time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements and additions to such properties necessary for the
conduct of its business, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
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Section 7.9 INSURANCE.
(a) The Borrower shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards as the Lender shall reasonably
specify, in amounts and under policies issued by insurers acceptable to the
Lender. All premiums on such insurance shall be paid by the Borrower and copies
of the policies delivered to the Lender. The Borrower will not use or permit the
Inventory or Equipment to be used in violation of any applicable law or in any
manner which might render inapplicable any insurance coverage.
(b) All insurance policies required under SECTION 7.9(a) shall name
the Lender as an additional named insured and shall contain "New York standard"
loss payable clauses in the form submitted to the Borrower by the Lender, or
otherwise in form and substance satisfactory to the Lender, naming the Lender as
loss payee as its interests may appear, and providing that (i) all proceeds
thereunder shall be payable to the Lender, (ii) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (iii) such policy and loss payable clauses may not be
canceled, amended or terminated unless at least 30 days' prior written notice is
given to the Lender.
(c) Any proceeds of insurance referred to in this SECTION 7.9 which
are paid to the Lender which, in the aggregate with respect to any particular
incident, event or claim are:
(1) less than $250,000, shall be paid over to Borrower and
shall be, at the option of the Borrower in its sole discretion either (i)
applied to rebuild, restore or replace the damaged or destroyed property, or
(ii) applied to the payment or prepayment of the Secured Obligations, or a
combination thereof;
(2) between $250,000 and $1,000,000, shall be, subject to the
agreement of Borrower and Lender, either (i) applied to rebuild, restore or
replace the damaged or destroyed property, or (ii) applied to the payment or
prepayment of the Secured Obligations, or a combination thereof; provided ,
however, that if Borrower and Lender cannot agree as to the application of such
insurance proceeds, the parties will submit the matter to binding arbitration in
accordance with the procedures and rules governing binding arbitration as
provided by the American Arbitration Association; provided further, that the
scope of such arbitration shall be limited to the determination of the
application of proceeds to either (i) restore or replace the damaged or
destroyed property, or (ii) pay or prepay the Secured Obligations, or a
combination thereof;
(3) $1,000,000 or more, shall be, at the option of the Lender
in its sole discretion, either (i) applied to rebuild, restore or replace the
damaged or destroyed property, or (ii) applied to the payment or prepayment of
the Secured Obligations, or a combination thereof.
(d) The Borrower shall at all times maintain, in addition to the
insurance required by SECTION 7.9(a) or any of the Security Documents, insurance
with responsible insurance companies against such risks and in such amounts as
is customarily maintained by similar businesses or as may be required by
applicable law, including such public liability, products liability, third party
property damage and business interruption insurance as is
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consistent with reasonable business practices, and from time to time deliver to
the Lender upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
Section 7.10 LOCATION OF OFFICES AND COLLATERAL.
(a) The Borrower will not change the location of its chief executive
office or the place where it keeps its books and records relating to the
Collateral or change its name, identity or corporate structure without giving
the Lender 30 days' prior written notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location, and all Equipment, other than motor vehicles, will at all times be
kept by the Borrower at one of the locations set forth in SCHEDULES 5.1(u) and
5.1(v), respectively, and shall not, without the prior written consent of the
Lender, be removed therefrom except, so long as no Event of Default shall have
occurred and be continuing, for sales of Inventory permitted under SECTION 7.6
and dispositions of Equipment permitted under SECTION 7.8(a).
(c) If any Inventory is in the possession or control of any of the
Borrower's agents or processors, the Borrower shall notify such agents or
processors of the Security Interest and, upon the occurrence of an Event of
Default, shall instruct them (and cause them to acknowledge such instruction) to
hold all such Inventory for the account of the Lender, subject to the
instructions of the Lender.
Section 7.11 RECORDS RELATING TO COLLATERAL.
(a) The Borrower will at all times (i) keep complete and accurate
records of Inventory on a basis consistent with past practices of the Borrower,
itemizing and describing the kind, type and quantity of Inventory and the
Borrower's cost therefor and a current price list for such Inventory, and (ii)
keep complete and accurate records of all other Collateral.
(b) The Borrower will take a physical listing of all Inventory,
wherever located, at least annually.
Section 7.12 INSPECTION.
The Lender (by any of its officers, employees or agents) shall have
the right, to the extent that the exercise of such right shall be within the
control of the Borrower, at any time or times to (a) visit the properties of the
Borrower, inspect the Collateral and the other assets of the Borrower and its
Subsidiaries and inspect and make extracts from the books and records of the
Borrower and its Subsidiaries, including, but not limited to, management letters
prepared by independent accountants, all during customary business hours at such
premises, (b) discuss the Borrower's business, assets, liabilities, financial
condition, results of operations and business prospects, insofar as the same are
reasonably related to the rights of the Lender hereunder or under any of the
Loan Documents, with the Borrower's and its Subsidiaries' (i) principal
officers, (ii) independent accountants and other professionals providing
services to the Borrower, and (iii) any other Person (except that any such
discussion with any third parties shall be
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conducted only in accordance with the Lender's standard operating procedures
relating to the maintenance of confidentiality of confidential information of
borrowers), and (c) verify the amount, quantity, value and condition of, or any
other matter relating to, any of the Collateral and in this connection to
review, audit and make extracts from all records and files related to any of the
Collateral. The Borrower will deliver to the Lender any instrument necessary to
authorize an independent accountant or other professional to have discussions of
the type outlined above with the Lender or for the Lender to obtain records from
any service bureau maintaining records on behalf of the Borrower.
Section 7.13 MAINTENANCE OF EQUIPMENT.
The Borrower shall maintain all physical property that constitutes
Equipment in good and workable condition in all material respects, with
reasonable allowance for wear and tear, and shall exercise proper custody over
all such property.
Section 7.14 INFORMATION AND REPORTS.
(a) SCHEDULE OF RECEIVABLES. The Borrower shall deliver to the
Lender (i) on or before the Effective Date, a Schedule of Receivables as of a
date not more than three Business Days prior to the Effective Date setting forth
a detailed aged trial balance of all of its then existing Receivables,
specifying the name of and the balance due from (and any rebate due to) each
Account Debtor obligated on a Receivable so listed, and (ii) no later than
twenty (20) days after the end of each accounting month of the Borrower, a
Schedule of Receivables as of the last Business Day of the Borrower's
immediately preceding accounting month setting forth (A) a detailed aged trial
balance of all the Borrower's then existing Receivables, specifying the name of
and the balance due from (and any rebate due to) each Account Debtor obligated
on a Receivable so listed and (B) a reconciliation to the Schedule of
Receivables delivered in respect of the next preceding accounting month.
(b) SCHEDULE OF INVENTORY. The Borrower shall deliver to the Lender
on or before the Effective Date, a Schedule of Inventory as of the last Business
Day of the immediately preceding accounting month of the Borrower, itemizing and
describing the kind, type, quantity and location of Inventory and the cost
thereof, and shall deliver to the Lender no later than twenty (20) days after
the end of each accounting month of the Borrower thereafter, a summary of
Borrower's Schedule of Inventory in form agreed upon by the Borrower and the
Lender; provided, however, that Lender may require a full Schedule of Inventory
with additional detail for any such monthly report in its sole but reasonable
discretion (including without limitation upon the Lender's request, an
itemization of the kind, type, quantity and location of Inventory and cost
thereof).
(c) SCHEDULE OF EQUIPMENT. The Borrower shall deliver to the Lender
on or before the Effective Date and thereafter on such subsequent dates as may
be requested by the Lender, a Schedule of Equipment, describing each item of
such Equipment and the location, cost and then current book value thereof.
(d) BORROWING BASE CERTIFICATE. The Borrower shall deliver to the
Lender not later than twenty (20) Business Days after the last day of each
accounting month of the Borrower
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a Borrowing Base Certificate prepared as of the close of business on the last
Business Day of such accounting month.
(e) NOTICE OF DIMINUTION OF VALUE. The Borrower shall give prompt
notice to the Lender of any matter or event which has resulted in, or may result
in, the actual or potential diminution in excess of $50,000 in the value of any
of its Collateral, except for any diminution in the value of any Receivables or
Inventory in the ordinary course of business which has been appropriately
reserved against, as reflected in the financial statements previously delivered
to the Lender pursuant to ARTICLE 9.
(f) CERTIFICATION. Each of the schedules delivered to the Lender
pursuant to this SECTION 7.14 shall be certified by the Chief Financial Officer
of the Borrower to be true, correct and complete as of the date indicated
thereon.
(g) OTHER INFORMATION. The Lender may, in its reasonable discretion,
from time to time require the Borrower to deliver the schedules described in
SECTION 7.14(a), (b), (c) and (d) more or less often and on different schedules
than specified in such Section, and the Borrower will comply with such requests.
The Borrower shall also furnish to the Lender such other information with
respect to the Collateral as the Lender may from time to time reasonably
request.
Section 7.15 POWER OF ATTORNEY.
The Borrower hereby appoints the Lender as its attorney, with power
(a) to endorse the name of the Borrower on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that may come into the
Lender's possession, and (b) to sign the name of the Borrower on any invoice or
bill of lading relating to any Receivables, Inventory or other Collateral, on
any drafts against customers related to letters of credit, on schedules and
assignments of Receivables furnished to the Lender by the Borrower, on notices
of assignment, financing statements and other public records relating to the
perfection or priority of the Security Interest or verifications of account and
on notices to or from customers.
ARTICLE 8 - AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner provided for in SECTION 12.11, the Borrower
will:
Section 8.1 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR
MATTERS.
Preserve and maintain its corporate existence, rights, franchises,
licenses and privileges in the jurisdiction of its incorporation and qualify and
remain qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization except where the failure
to be qualified or authorized would not have a Materially Adverse Effect.
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Section 8.2 COMPLIANCE WITH APPLICABLE LAW.
Comply with all applicable laws relating to the Borrower except to
the extent a failure to so comply would have a Materially Adverse Effect.
Section 8.3 CONDUCT OF BUSINESS.
Engage only in businesses in substantially the same fields as the
businesses conducted on the Effective Date.
Section 8.4 PAYMENT OF TAXES AND CLAIMS.
Pay or discharge when due (a) all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any properties belonging to it, and (b) all lawful claims of materialmen,
mechanics, carriers, warehousemen and landlords for labor, materials, supplies
and rentals which, if unpaid, might become a Lien on any properties of the
Borrower or such Subsidiary, except that this SECTION 8.4 shall not require the
payment or discharge of any such tax, assessment, charge, levy or claim which is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established on the appropriate books.
Section 8.5 ACCOUNTING METHODS AND FINANCIAL RECORDS.
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete), as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP.
Section 8.6 USE OF PROCEEDS.
(a) Use the proceeds of (i) the Initial Loans to pay the amounts and
for the purposes indicated in SCHEDULE 8.6 to the Persons indicated therein, and
(ii) all subsequent Revolving Credit Loans only for working capital and general
business purposes, and
(b) not use any part of such proceeds to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation G or U of the Board of Governors
of the Federal Reserve System) or for any other purpose which would involve a
violation of such Regulation G or U or Regulation T or X of such Board of
Governors or for any other purpose prohibited by law or by the terms and
conditions of this Agreement.
Section 8.7 HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL
REQUIREMENTS.
(a) In addition to, and not in derogation of, the requirements of
SECTION 8.2 and of the Security Documents, comply with all laws, governmental
standards and regulations applicable to the Borrower or to any of its assets in
respect of occupational health and safety laws, rules and regulations and
Environmental Laws, promptly notify the Lender of its receipt of any notice of a
violation of any such law, rule, standard or regulation from or through any
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Governmental Authority and indemnify and hold the Lender harmless from all loss,
cost, damage, liability, claim and expense incurred by or imposed upon the
Lender on account of the Borrower's failure to perform its obligations under
this SECTION 8.7.
(b) Whenever the Borrower gives notice to the Lender pursuant to
this SECTION 8.7 with respect to a matter that reasonably could be expected to
result in liability to the Borrower in excess of $50,000 in the aggregate, the
Borrower shall, at the Lender's written request and the Borrower's expense, (i)
cause an independent environmental engineer acceptable to the Lender to conduct
such tests of the site as are necessary in the professional judgment of the
environmental engineer to determine the nature and extent of the environmental
impact to the site where the noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
setting forth the results of such tests, a proposed plan to bring the Borrower
into compliance with such Environmental Laws and an estimate of the costs
thereof, and (ii) provide to the Lender a supplemental report of such engineer
or other engineer acceptable to the Lender whenever the scope of the
noncompliance or the response thereto or the estimated costs thereof shall
materially change.
Section 8.8 ACCURACY OF INFORMATION.
All written information, reports, statements and other papers and
data furnished to the Lender, whether pursuant to ARTICLE 9 or any other
provision of this Agreement or any of the other Loan Documents, shall be, at the
time the same is so furnished, complete and correct in all material respects to
the extent necessary to give the Lender true and accurate knowledge of the
subject matter; provided, however, that with respect to the accuracy of pro
formas, projections or forecasts required hereunder, Borrower covenants only
that information used as a basis for such pro formas, projections or forecasts
shall be knowingly or reasonably believed by the Borrower to be true and correct
when used, and that such pro formas, projections and forecasts represent the
good faith belief of the Borrower when made.
Section 8.9 REVISIONS OR UPDATES TO SCHEDULES.
Should any of the information or disclosures provided on any of the
Schedules originally attached hereto become outdated or incorrect in any
material respect, the Borrower shall provide promptly to the Lender such
revisions or updates to such Schedule(s) as may be necessary or appropriate to
update or correct such Schedule(s); PROVIDED that no such revisions or updates
to any Schedule(s) shall be deemed to have cured any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule(s) unless and until the Lender, in its sole discretion, shall have
accepted in writing such revisions or updates to such Schedule(s).
ARTICLE 9 - INFORMATION
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner set forth in SECTION 12.11, the Borrower will
furnish to the Lender at the Lender's Office:
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Section 9.1 FINANCIAL STATEMENTS.
(a) AUDITED YEAR-END STATEMENTS. As soon as available, but in any
event within 90 days after the end of each fiscal year of the Borrower, copies
of the balance sheet of the Borrower as at the end of such fiscal year and the
related statements of income, shareholders' equity and cash flow for such fiscal
year, all on a consolidating basis, in each case setting forth in comparative
form the figures for the previous year of the Borrower and reported on, without
qualification, by Ernst & Young LLP or other independent certified public
accountants selected by the Borrower and acceptable to the Lender.
(b) MONTHLY FINANCIAL STATEMENTS. As soon as available, but in any
event within thirty (30) days after the end of each accounting month of the
Borrower, copies of the unaudited balance sheet of the Borrower as at the end of
such month and the related unaudited income statement for the Borrower for such
month and for the portion of the fiscal year of the Borrower through such month
all on a consolidating basis, certified by the chief financial officer of the
Borrower to the best of his knowledge as presenting fairly the financial
condition and results of operations of the Borrower as at the date thereof and
for the periods ended on such date, subject to normal year end adjustments.
(c) PROJECTED FINANCIAL STATEMENTS. In any case within thirty (30)
days after the end of the Borrower's fiscal year, and otherwise within thirty
(30) days after the written request of the Lender, forecasted financial
statements, prepared by the Borrower, consisting of balance sheets, cash flow
statements and income statements of the Borrower, reflecting projected
borrowings hereunder and setting forth the assumptions on which such forecasted
financial statements were prepared, covering the one-year period until the next
fiscal year end.
All such financial statements in CLAUSES (a) AND (b) above shall be
complete and correct in all material respects and shall be prepared in
accordance with GAAP applied consistently throughout the periods reflected
therein and shall be prepared on a consolidating basis. Projected financial
statements described CLAUSE (c) above and other projections, pro formas and
forecasts which have been or are to be delivered to the Lender hereunder, shall
reflect the good faith projections of the Borrower based on reasonable
assumptions of the Borrower.
Section 9.2 ACCOUNTANTS' CERTIFICATE.
Together with each delivery of financial statements required by
SECTION 9.1(A), a certificate of the accountants who performed the audit in
connection with such statements (a) stating that they have reviewed this
Agreement and that, in making the audit necessary to the issuance of a report on
such financial statements, they have obtained no knowledge of any Default or
Event of Default or, if such accountants have obtained knowledge of a Default or
Event of Default, specifying the nature and period of existence thereof, and (b)
setting forth the calculations necessary to establish whether or not the
Borrower was in compliance with the covenants contained in SECTIONS 10.1, 10.2,
and 10.5 as of the date of such statements.
The Borrower authorizes the Lender, after notice to Borrower, to
discuss the financial condition of the Borrower with the Borrower's independent
certified public accountants and agrees that such discussion or communication
shall be without liability to either the Lender
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or the Borrower's independent certified public accountants. The Borrower shall
deliver a letter addressed to such accountants authorizing them to comply with
the provisions of this SECTION 9.2. Notice by Lender to Borrower under this
SECTION 9.2 may be given by telephone.
Section 9.3 OFFICER'S CERTIFICATE.
Together with each delivery of financial statements required by
SECTION 9.1(a) and (b), a certificate of the Borrower's President or chief
financial officer, in a form satisfactory to Lender in its sole discretion, (a)
stating that, based on an examination sufficient to enable him to make an
informed statement, no Default or Event of Default exists or, if such is not the
case, specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the Borrower
with respect to such Default or Event of Default, (b) setting forth the
calculations necessary to establish whether or not the Borrower was in
compliance with the covenants contained in SECTIONS 10.1, 10.2, and 10.5 as of
the date of such statements, and (c) containing other information reasonably
required by Lender to support Borrower's Borrowing Base calculations including,
but not limited to Accounts Receivable aging and Inventory listings.
Section 9.4 COPIES OF OTHER REPORTS.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants, including, without limitation, all management reports.
(b) From time to time and promptly upon each request, such
forecasts, data, certificates, reports, statements, opinions of counsel,
documents or further information regarding the business, assets, liabilities,
financial condition, results of operations or business prospects of the Borrower
as the Lender may reasonably request. The rights of the Lender under this
SECTION 9.4(b) are in addition to and not in derogation of its rights under any
other provision of this Agreement or any Loan Document.
(c) If requested by the Lender, statements in conformity with the
requirements of Federal Reserve Form G-1 or U-1 referred to in Regulations G and
U, respectively, of the Board of Governors of the Federal Reserve System.
Section 9.5 NOTICE OF LITIGATION AND OTHER MATTERS.
Prompt notice of:
(a) the commencement, to the extent the Borrower is aware of the
same, of all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating adversely to, or adversely
affecting, the Borrower or any Affiliate of the Borrower or any of their
respective property, assets or businesses which would, singly or in the
aggregate, cause a Default or an Event of Default or have a Materially Adverse
Effect,
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(b) any amendment of the articles of incorporation or by-laws
of the Borrower,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower or any
Affiliate of the Borrower which has had or would have any Materially Adverse
Effect and any change in the executive officers of the Borrower, and
(d) any (i) Default or Event of Default, or (ii) event that
constitutes or that, with the passage of time or giving of notice or both, would
constitute a default or event of default by the Borrower under any material
agreement (other than this Agreement) to which the Borrower is a party or by
which the Borrower or any of its property may be bound if the exercise of
remedies thereunder by the other party to such agreement would have, either
individually or in the aggregate, a Materially Adverse Effect.
Section 9.6 ERISA.
As soon as possible and in any event within 30 days after the
Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Benefit Plan has
occurred or will occur,
(b) the aggregate present value of the Unfunded Vested Accrued
Benefits under all Plans has increased to an amount in excess of $0, or
(c) the Borrower is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan required by reason of
its complete or partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan, a certificate of the President or the chief
financial officer of the Borrower setting forth the details of such of the
events described in CLAUSES (a) through (c) as applicable and the action which
is proposed to be taken with respect thereto and, simultaneously with the filing
thereof, copies of any notice or filing which may be required by the PBGC or
other agency of the United States government with respect to such of the events
described in CLAUSES (a) through (c) as applicable.
ARTICLE 10 - NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Lender shall
otherwise consent in the manner set forth in SECTION 12.11, the Borrower will
not directly or indirectly:
Section 10.1 FINANCIAL RATIOS.
(a) MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth
of the Borrower at any time to be less than $7,250,000, measured on a
quarterly basis beginning April 30, 2000..
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(b) MINIMUM CURRENT RATIO. Permit the Current Ratio at any
time to be less than 1.5 to 1.0, measured on a quarterly basis beginning
April 30, 2000.
(c) MAXIMUM FUNDED DEBT RATIO. Permit the Funded Debt Ratio,
measured on a quarterly basis beginning April 30, 2000, to exceed (i) 4.15:1
from April 30, 2000 through January 30, 2001; and (ii) 3:1 from and after
January 31, 2001. In calculating the Funded Debt Ratio, EBITDA will be rolled up
as follows:
(1) For the April 30, 2000 measurement of the maximum Funded
Debt Ratio, EBITDA will be the sum of (x) $1,080,000 (which represents the
deemed EBITDA of DCI alone for three (3) fiscal quarters) PLUS (y) EBITDA for
ASI alone for the three (3) fiscal quarters immediately preceding the fiscal
quarter beginning February 1, 2000 PLUS (z) the calculated EBITDA for DCI's and
ASI's combined operations for the fiscal quarter beginning February 1, 2000.
(2) For the July 31, 2000 measurement of the maximum Funded
Debt Ratio, EBITDA will be the sum of (x) $720,000 (which represents the deemed
EBITDA of DCI alone for two (2) fiscal quarters) PLUS (y) EBITDA for ASI alone
for the two (2) fiscal quarters immediately preceding the fiscal quarter
beginning February 1, 2000 PLUS (z) the calculated EBITDA for DCI's and ASI's
combined operations for the two (2) fiscal quarters beginning February 1, 2000.
(3) For the October 31, 2000 measurement of the maximum Funded
Debt Ratio, EBITDA will be the sum of (x) $360,000 (which represents the deemed
EBITDA of DCI alone for one (1) fiscal quarter) PLUS (y) EBITDA for ASI alone
for the fiscal quarter immediately preceding the fiscal quarter beginning
February 1, 2000 PLUS (z) the calculated EBITDA for DCI's and ASI's combined
operations for the three (3) fiscal quarters beginning February 1, 2000.
(4) From and after the January 31, 2001 measurement of the
maximum Funded Debt Ratio, EBITDA will be the calculated EBITDA for DCI's and
ASI's combined operations.
(d) MAXIMUM LIABILITIES RATIO. Permit the Liabilities Ratio of
the Borrower at any time to exceed 1.95 to 1, measured on a quarterly basis
beginning April 30, 2000.
(e) MINIMUM DEBT SERVICE COVERAGE RATIO. Permit the Debt
Service Coverage Ratio of the Borrower at any time to be less than 1.25:1,
measured on a quarterly basis beginning April 30, 2000.
Section 10.2 INDEBTEDNESS.
Create, assume, or otherwise become or remain obligated in respect
of, or permit or suffer to exist or to be created, assumed or incurred or to be
outstanding any Indebtedness for Money Borrowed, except for Permitted
Indebtedness for Money Borrowed.
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Section 10.3 GUARANTIES.
Become or remain liable with respect to any Guaranty of any
obligation of any other Person except in connection with the Bond Documents.
Section 10.4 INVESTMENTS.
Acquire, after the Agreement Date, any Business Unit or Investment
or, after such date, permit any Investment to be outstanding, other than
Permitted Investments.
Section 10.5 CAPITAL EXPENDITURES.
Make or incur any Capital Expenditures, except that the Borrower may
make or incur Capital Expenditures in any fiscal year in an amount not to
exceed, in the aggregate, $300,000.
Section 10.6 RESTRICTED DISTRIBUTIONS AND PAYMENTS, ETC.
Declare or make any Restricted Distribution or Restricted Payment,
except that so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Borrower may make may make payments on
the Subordinated Indebtedness to the extent permitted by the Subordination
Agreements or the other subordination provisions applicable thereto.
Section 10.7 MERGER, CONSOLIDATION AND SALE OF ASSETS.
Merge or consolidate with any other Person or sell, lease or
transfer or otherwise dispose of all or a substantial portion of its assets to
any Person.
Section 10.8 TRANSACTIONS WITH AFFILIATES.
Effect any transaction with any Affiliate on a basis less favorable
to the Borrower than would be the case if such transaction had been effected
with a Person not an Affiliate.
Section 10.9 LIENS.
Create, assume or permit or suffer to exist or to be created or
assumed any Lien on any of the property or assets of the Borrower, real,
personal or mixed, tangible or intangible, except for Permitted Liens and Liens
described on SCHEDULE 5.1(H).
Section 10.10 OPERATING LEASES.
Enter into any lease other than a Capitalized Lease which would
cause the annual payment obligations of the Borrower under all leases (other
than leases of real property in effect on the Effective Date (and renewals and
substitutions therefor) and Capitalized Leases) to exceed $25,000 in the
aggregate excepting that certain Aircraft Lease Agreement dated July 11, 1997 by
and between ASI and Scope Leasing, wherein ASI makes lease payments of
approximately $42,000 per year.
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Section 10.11 BENEFIT PLANS.
Permit, or take any action which would result in, the aggregate
present value of the Unfunded Vested Accrued Benefits under all Benefit Plans of
the Borrower to exceed $0.
Section 10.12 SALES AND LEASEBACKS.
Enter into any arrangement with any Person providing for the leasing
from such Person of real or personal property which has been or is to be sold or
transferred, directly or indirectly, by the Borrower to such Person.
Section 10.13 AMENDMENTS OF OTHER AGREEMENTS.
Amend in any way the interest rate or principal amount or schedule
of payments of principal and interest with respect to any Indebtedness (other
than the Secured Obligations) other than to reduce the interest rate or extend
the schedule of payments with respect thereto.
Section 10.14 BOND PROCEED EXPENDITURES.
Expend any proceeds of the Bonds without the prior written approval
of Lender in its sole, but reasonable discretion.
ARTICLE 11 - DEFAULT
Section 11.1 EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental or nongovernmental body:
(a) DEFAULT IN PAYMENT OF LOANS. The Borrower shall default in any
payment of principal of, or interest on, any Loan or Note as due within five (5)
calendar days of the date when due (whether at maturity, by reason of
acceleration or otherwise).
(b) OTHER PAYMENT DEFAULT. The Borrower shall default in the
payment, as and when due, of principal of or interest on, any other Secured
Obligation, and such default shall continue for five days after written notice
thereof has been given to the Borrower by the Lender.
(c) MISREPRESENTATION. Any representation or warranty made or deemed
to be made by the Borrower under this Agreement or any other Loan Document or
any amendment hereto or thereto shall at any time prove to have been incorrect
or misleading in any material respect when made.
(d) DEFAULT IN PERFORMANCE. The Borrower shall default (i) in the
performance or observance of any term, covenant, condition or agreement
contained in ARTICLES 6, 7, 8, 9 or
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10; or (ii) in the performance or observance of any term, covenant, condition or
agreement contained in any other provision of this Agreement (other than as
specifically provided for otherwise in this SECTION 11.1) and such default shall
continue for a period of 30 days after written notice thereof has been given to
the Borrower by the Lender.
(e) INDEBTEDNESS CROSS-DEFAULT. (i) The Borrower shall fail to pay
when due and payable the principal of or interest on any Indebtedness (other
than the Loans or Notes) where the principal amount of such Indebtedness is in
excess of $25,000, or (ii) the maturity of any such Indebtedness shall have (A)
been accelerated in accordance with the provisions of any indenture, contract or
instrument providing for the creation of or concerning such Indebtedness, or (B)
been required to be prepaid prior to the stated maturity thereof, or (iii) any
event shall have occurred and be continuing which, with or without the passage
of time or the giving of notice, or both, would permit any holder or holders of
such Indebtedness, any trustee or agent acting on behalf of such holder or
holders or any other Person so to accelerate such maturity. Notwithstanding
SECTION 11.1(e)(i) above, Borrower's failure to pay regular trade payables
incurred in the ordinary course of business in an amount up to $50,000 shall not
constitute an Event of Default unless and until such trade payables remain
unpaid or otherwise unsatisfied for ninety (90) days of the date due, provided
that Borrower notifies Lender of any such trade payables not later than thirty
(30) days after the due date and thereafter updates the status of such trade
payables periodically to the reasonable satisfaction of Lender.
(f) OTHER CROSS-DEFAULTS. The Borrower shall default in the payment
when due or in the performance or observance of any material obligation or
condition of any agreement, contract or lease (other than the Security Documents
or any such agreement, contract or lease relating to Indebtedness), if the
exercise of remedies thereunder by the other party to such agreement could have
a Materially Adverse Effect.
(g) VOLUNTARY BANKRUPTCY PROCEEDING. Any Obligor shall (i) commence
a voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (ii) commence a proceeding seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts, (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(h) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding
shall be commenced against any Obligor in any court of competent jurisdiction
seeking (i) relief under the federal bankruptcy laws (as now or hereafter in
effect) or under any other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or adjustment of debts, or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of any
Obligor or of all or any substantial part of the assets, domestic or foreign, of
any Obligor, and such case or proceeding shall continue undismissed or unstayed
for a period of 60 consecutive calendar days,
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or an order granting the relief requested in such case or proceeding against any
Obligor (including, but not limited to, an order for relief under such federal
bankruptcy laws) shall be entered.
(i) LOAN DOCUMENTS. Any event of default or Event of Default under
any other Loan Document shall occur or any Obligor shall default in the
performance or observance of any material term, covenant, condition or agreement
contained in, or the payment of any other sum covenanted to be paid by any
Obligor under, any such Loan Document; or any provision of this Agreement, or of
any other Loan Document after delivery thereof hereunder, shall for any reason
cease to be valid and binding, other than a nonmaterial provision rendered
unenforceable by operation of law, or any Obligor or other party thereto (other
than the Lender) shall so state in writing; or this Agreement or any other Loan
Document, after delivery thereof hereunder, shall for any reason (other than any
action taken independently by the Lender and except to the extent permitted by
the terms thereof) cease to create a valid, perfected and, except as otherwise
expressly permitted herein, first priority Lien on, or security interest in, any
of the Collateral purported to be covered thereby.
(j) JUDGMENT. A judgment or order for the payment of money which
exceeds $50,000 in amount shall be entered against any Obligor by any court and
such judgment or order shall continue undischarged or unstayed for 30 days.
(k) ATTACHMENT. A warrant or writ of attachment or execution or
similar process which exceeds $50,000 in value shall be issued against any
property of any Obligor and such warrant or process shall continue undischarged
or unstayed for 30 days.
(l) ERISA. (i) Any Termination Event with respect to a Benefit Plan
shall occur that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Benefit Plan with respect to which a
Termination Event occurs on the same day (but only to the extent that such
excess is the property of the Borrower) over (B) the present value on such day
of all vested nonforfeitable benefits under such other Benefit Plan, results in
an Unfunded Vested Accrued Benefit in excess of $0, (ii) any Benefit Plan shall
incur an "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA) for which a waiver has not been obtained in accordance
with the applicable provisions of the Code and ERISA, or (iii) the Borrower is
in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from the Borrower's complete or
partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan.
(m) QUALIFIED AUDITS. The independent certified public accountants
retained by the Borrower shall refuse to deliver an opinion in accordance with
Section 9.1(a) with respect to the annual financial statements of the Borrower.
(n) CHANGE OF CONTROL. ASI shall cease to own, beneficially and of
record, 100% of the outstanding capital stock of DCI or such ownership shall
cease to vest in ASI, voting control of DCI.
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(o) MATERIAL ADVERSE CHANGE. There occurs any act, omission, event,
undertaking or circumstance or series of acts, omissions, events, undertakings
or circumstances which have, or in the sole but reasonable judgment of the
Lender would have, either individually or in the aggregate, a Materially Adverse
Effect.
Section 11.2 REMEDIES.
(a) AUTOMATIC ACCELERATION AND TERMINATION OF FACILITIES. Upon the
occurrence of an Event of Default specified in SECTION 11.1(g) or (h), (i) the
principal of and the interest on the Loans and the Notes at the time
outstanding, and all other amounts owed to the Lender under this Agreement or
any of the Loan Documents and all other Secured Obligations, shall thereupon
become due and payable without presentment, demand, protest or other notice of
any kind, all of which are expressly waived, anything in this Agreement or any
of the Loan Documents to the contrary notwithstanding, and (ii) the Revolving
Credit Facility and the commitment of the Lender to make advances thereunder or
under this Agreement shall immediately terminate.
(b) OTHER REMEDIES. If any Event of Default (other than as
specified in SECTION 11.1(g) or (h)) shall have occurred and be continuing,
the Lender, in its sole and absolute discretion, may do any of the following:
(i) declare the principal of and interest on the Loans and the
Notes at the time outstanding, and all other amounts owed to the Lender
under this Agreement or any of the Loan Documents and all other Secured
Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in
this Agreement or the Loan Documents to the contrary notwithstanding;
(ii) terminate the Revolving Credit Facility and any
commitment of the Lender to make advances hereunder;
(c) FURTHER REMEDIES. If any Event of Default shall have
occurred and be continuing, the Lender, in its sole and absolute discretion,
may do any of the following:
(i) notify, or request the Borrower to notify, in writing or
otherwise, any Account Debtor or obligor with respect to any one or more
of the Receivables to make payment to the Lender or any agent or designee
of the Lender, at such address as may be specified by the Lender, and, if,
notwithstanding the giving of any notice, any Account Debtor or other such
obligor shall make payments to the Borrower, the Borrower shall hold all
such payments it receives in trust for the Lender, without commingling the
same with other funds or property of, or held by, the Borrower and shall
deliver the same to the Lender or any such agent or designee immediately
upon receipt by the Borrower in the identical form received, together with
any necessary endorsements;
(ii) settle or adjust disputes and claims directly with
Account Debtors and other obligors on Receivables for amounts and on terms
which the Lender considers
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advisable and in all such cases only the net amounts received by the
Lender in payment of such amounts, after deductions of costs and
attorneys' fees, shall constitute Collateral, and the Borrower shall have
no further right to make any such settlements or adjustments or to accept
any returns of merchandise;
(iii) enter upon any premises on which Inventory or Equipment
may be located and, without resistance or interference by the Borrower,
take physical possession of any or all thereof and maintain such
possession on such premises or move the same or any part thereof to such
other place or places as the Lender shall choose, without being liable to
the Borrower on account of any loss, damage or depreciation that may occur
as a result thereof, so long as the Lender shall act reasonably and in
good faith;
(iv) require the Borrower to and the Borrower shall, without
charge to the Lender, assemble the Inventory and Equipment and maintain or
deliver it into the possession of the Lender or any agent or
representative of the Lender at such place or places as the Lender may
designate;
(v) at the expense of the Borrower, cause any of the Inventory
and Equipment to be placed in a public or field warehouse, and the Lender
shall not be liable to the Borrower on account of any loss, damage or
depreciation that may occur as a result thereof, so long as the Lender
shall act reasonably and in good faith;
(vi) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of the Borrower's
premises and, without breach of the peace, until the Lender completes the
enforcement of its rights in the Collateral, take possession of such
premises or place custodians in exclusive control thereof, remain on such
premises and use the same and any of the Borrower's equipment, for the
purpose of (A) completing any work in process, preparing any Inventory for
disposition and disposing thereof, and (B) collecting any Receivable, and
the Lender is hereby granted a license or sublicense and all other rights
as may be necessary, appropriate or desirable to use the Intellectual
Property in connection with the foregoing, and the rights of the Borrower
under all licenses and franchise agreements shall inure to the Lender's
benefit (provided, however, that any use of any federally registered
trademarks as to any goods shall be subject to the control as to the
quality of such goods of the owner of such trademarks and the goodwill of
the business symbolized thereby);
(vii) exercise any and all of its rights under any and all
of the Security Documents;
(viii) apply any cash Collateral to the payment of the Secured
Obligations in any order in which the Lender may elect or use such cash in
connection with the exercise of any of its other rights hereunder or under
any of the Security Documents;
(ix) establish or cause to be established one or more
lockboxes or other arrangement for the deposit of proceeds of Receivables,
and, in such case, the Borrower
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shall cause to be forwarded to the Lender at the Lender's Office, on a
daily basis, copies of all checks and other items of payment and deposit
slips related thereto deposited in such lockboxes, together with
collection reports in form and substance satisfactory to the Lender; and
(x) exercise all of the rights and remedies of a secured party
under the UCC (whether or not the UCC is applicable) and under any other
applicable law, including, without limitation, the right, without notice
except as specified below and with or without taking the possession
thereof, to sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any location chosen by the Lender, for cash,
on credit or for future delivery and at such price or prices and upon such
other terms as the Lender may deem commercially reasonable. The Borrower
agrees that, to the extent notice of sale shall be required by law, at
least 10 days' notice (or such longer period as required by law) to the
Borrower of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notice, but
notice given in any other reasonable manner or at any other reasonable
time shall also constitute reasonable notification. The Lender shall not
be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Lender may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
which it was so adjourned.
Section 11.3 Application of Proceeds.
All proceeds from each sale of, or other realization upon, all or
any part of the Collateral following an Event of Default shall be applied or
paid over as follows:
(a) FIRST: to the payment of all costs and expenses incurred
in connection with such sale or other realization, including reasonable
attorneys' fees,
(b) SECOND: to the payment of the Secured Obligations (with
the Borrower remaining liable for any deficiency) in any order which the
Lender may elect, and
(c) THIRD: the balance (if any) of such proceeds shall be paid
to the Borrower or, subject to any duty imposed by law or otherwise, to
whomsoever is entitled thereto.
THE BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY
REMAINING IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH INTEREST THEREON
AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE HEREUNDER ON SUCH
SECURED OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF THE SECURED
OBLIGATIONS.
Section 11.4 Power of Attorney.
In addition to the authorizations granted to the Lender under
SECTION 7.15 or under any other provision of this Agreement or any of the Loan
Documents, upon and after an Event of Default, the Borrower hereby irrevocably
designates, makes, constitutes and appoints the Lender (and all Persons
designated by the Lender from time to time) as the Borrower's true
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and lawful attorney and agent in fact, and the Lender or any agent of the Lender
may, without notice to the Borrower, and at such time or times as the Lender or
any such agent in its sole discretion may determine, in the name of the Borrower
or the Lender,
(a) demand payment of the Receivables, enforce payment thereof by
legal proceedings or otherwise, settle, adjust, compromise, extend or renew any
or all of the Receivables or any legal proceedings brought to collect the
Receivables, discharge and release the Receivables or any of them and exercise
all of the Borrower's rights and remedies with respect to the collection of
Receivables,
(b) prepare, file and sign the name of the Borrower on any proof of
claim in bankruptcy or any similar document against any Account Debtor or any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with any of the Collateral,
(c) endorse the name of the Borrower upon any chattel paper,
document, instrument, notice, freight bill, bill of lading or similar document
or agreement relating to the Receivables, the Inventory or any other Collateral,
(d) use the stationery of the Borrower, open the Borrower's mail,
notify the post office authorities to change the address for delivery of the
Borrower's mail to an address designated by the Lender and sign the name of the
Borrower to verifications of the Receivables and on any notice to the Account
Debtors,
(e) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Receivables, Inventory or other Collateral to which the Borrower or any
Subsidiary of the Borrower has access.
Section 11.5 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES.
(a) RIGHTS CUMULATIVE. The rights and remedies of the Lender under
this Agreement, the Note and each of the Loan Documents shall be cumulative and
not exclusive of any rights or remedies which it or they would otherwise have.
In exercising such rights and remedies, the Lender may be selective and no
failure or delay by the Lender in exercising any right shall operate as a waiver
of such right nor shall any single or partial exercise of any power or right
preclude its other or further exercise or the exercise of any other power or
right.
(b) WAIVER OF MARSHALING. The Borrower hereby waives any right
to require any marshaling of assets and any similar right.
(c) LIMITATION OF LIABILITY. Nothing contained in this ARTICLE 11 or
elsewhere in this Agreement or in any of the Loan Documents shall be construed
as requiring or obligating the Lender or any agent or designee of the Lender to
make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or notice or take any
action with respect to any Receivable or any other Collateral or the moneys due
or to become due thereunder or in connection therewith or to take any steps
necessary to preserve any rights against prior parties, and neither the Lender
nor any of its agents or designees shall have any liability to the Borrower for
actions taken pursuant to this Article 11, any other provision of
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this Agreement or any of the Loan Documents, so long as the Lender or such agent
or designee shall act reasonably and in good faith.
(d) APPOINTMENT OF RECEIVER. In any action under this ARTICLE 11,
the Lender shall be entitled to the appointment of a receiver, without notice of
any kind whatsoever, to take possession of all or any portion of the Collateral
and to exercise such power as the court shall confer upon such receiver.
Section 11.6 TRADEMARK LICENSE.
The Borrower hereby grants to the Lender the nonexclusive right and
license to use any trademarks, tradenames and servicemarks then used by the
Borrower, for the purposes set forth in SECTION 11.2(c)(vi) and for the purpose
of enabling the Lender to realize on the Collateral and to permit any purchaser
of any portion of the Collateral through a foreclosure sale or any other
exercise of the Lender's rights and remedies under the Loan Documents to use,
sell or otherwise dispose of the Collateral bearing any such trademark. Such
right and license is granted free of charge, without the requirement that any
monetary payment whatsoever be made to the Borrower or any other Person by the
Lender. The Borrower hereby represents, warrants, covenants and agrees that it
presently has, and shall continue to have, the right, without the approval or
consent of others, to grant the license set forth in this SECTION 11.6.
Section 11.7 FORBEARANCE/MODIFICATION FEES. If Borrower requests,
and Lender agrees, in Lender's sole and absolute discretion, to enter into a
forbearance or modification agreement in connection with any Default, Event of
Default or potential default, in addition to legal and other fees, costs and
expenses incurred in connection with Lender's protection of its Collateral, due
diligence and documentation, Borrower will pay a forbearance or modification fee
determined by Lender, but in no event less than $10,000.
ARTICLE 12 - MISCELLANEOUS
Section 12.1 NOTICES.
(a) METHOD OF COMMUNICATION. Except as specifically provided in this
Agreement or in any of the Loan Documents, all notices and the communications
hereunder and thereunder shall be in writing or by telephone subsequently
confirmed in writing. Notices in writing shall be delivered personally or sent
by overnight courier service, by certified or registered mail, postage pre-paid,
or by facsimile transmission and shall be deemed received, in the case of
personal delivery, when delivered, in the case of overnight courier service, on
the next Business Day after delivery to such service, in the case of mailing, on
the third day after mailing (or, if such day is a day on which deliveries of
mail are not made, on the next succeeding day on which deliveries of mail are
made) and, in the case of facsimile transmission, upon transmittal, provided
that any facsimile notice from Borrower to Lender will be concurrently made with
another form of acceptable notice hereunder.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it
at the following addresses, or any other address of which all the other parties
are notified in writing.
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If to either Borrower: Airport Systems International, Inc.
11300 W. 89th Street
Overland Park, KS 66214
Attn: Keith S. Cowan, CEO
Facsimile No. (913) 492-0870
with copy to: Blackwell Sanders Peper Martin LLP
2300 Main Street, Suite 1000
P.O. Box 419777
Kansas City, Missouri 641141-6777
Attn: Merry Evans, Esq.
Facsimile No. (816) 983-8080
If to the Lender: Bank of America, N.A.
1200 One Kansas City Place
1200 Main Street
Kansas City, Missouri
Attention: Charles Wooten
Facsimile No. 816-979-7174
with copy to: Bryan Cave LLP
3500 One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Christopher J. Fisher
Facsimile No. (816) 374-3300
(c) LENDER'S OFFICE. The Lender hereby designates its office located
at 1200 One Kansas City Place, 1200 Main Street, Kansas City, Missouri 64105, or
any subsequent office which shall have been specified for such purpose by
written notice to the Borrower, as the office to which payments due are to be
made and at which Loans will be disbursed.
Section 12.2 EXPENSES.
The Borrower agrees to pay or reimburse on demand all costs and
expenses incurred by the Lender, including, without limitation, the reasonable
fees and disbursements of counsel, in connection with (a) the negotiation,
preparation, execution, delivery, administration, enforcement and termination of
this Agreement and each of the other Loan Documents, whenever the same shall be
executed and delivered, including, without limitation, (i) the out-of-pocket
costs and expenses incurred in connection with the administration and
interpretation of this Agreement and the other Loan Documents, (ii) the costs
and expenses of appraisals of the Collateral, (iii) the costs and expenses of
lien searches, and (iv) taxes, fees and other charges of filing the Financing
Statements and continuations and the costs and expenses of taking other actions
to perfect, protect, and continue the Security Interest; (b) the preparation,
execution and delivery of any waiver, amendment, supplement or consent by the
Lender relating to this Agreement or any of the Loan Documents; (c) sums paid or
obligations incurred in connection with the payment of any amount or taking any
action required of the Borrower under the Loan
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Documents that the Borrower fails to pay or take; (d) if an Event of Default
exists, costs of inspections and verifications of the Collateral, including,
without limitation, standard per diem fees charged by the Lender for travel,
lodging, and meals for inspections of the Collateral and the Borrower's
operations and books and records by the Lender's agents; (e) costs and expenses
of forwarding loan proceeds, collecting checks and other items of payment, and
establishing and maintaining each Disbursement Account, Agency Account and
Lockbox; (f) costs and expenses of preserving and protecting the Collateral; (g)
after the occurrence of a Default, consulting with and obtaining opinions and
appraisals from one or more Persons, including personal property appraisers,
accountants and lawyers, concerning the value of any Collateral for the Secured
Obligations or related to the nature, scope or value of any right or remedy of
the Lender hereunder or under any of the Loan Documents, including any review of
factual matters in connection therewith, which expenses shall include the fees
and disbursements of such Persons; and (h) costs and expenses paid or incurred
to obtain payment of the Secured Obligations, enforce the Security Interest,
sell or otherwise realize upon the Collateral, and otherwise enforce the
provisions of the Loan Documents, or to prosecute or defend any claim in any way
arising out of, related to or connected with, this Agreement or any of the Loan
Documents, which expenses shall include the reasonable fees and disbursements of
counsel and of experts and other consultants retained by the Lender.
The foregoing shall not be construed to limit any other provisions
of the Loan Documents regarding costs and expenses to be paid by the Borrower.
The Borrower hereby authorizes the Lender to debit the Borrower's loan accounts
(by increasing the principal amount of the Revolving Credit Loan) in the amount
of any such costs and expenses owed by the Borrower when due.
Section 12.3 STAMP AND OTHER TAXES.
The Borrower will pay any and all stamp, registration, recordation
and similar taxes, fees or charges and shall indemnify the Lender against any
and all liabilities with respect to or resulting from any delay in the payment
or omission to pay any such taxes, fees or charges, which may be payable or
determined to be payable in connection with the execution, delivery, performance
or enforcement of this Agreement and any of the Loan Documents or the perfection
of any rights or security interest thereunder.
Section 12.4 SETOFF.
In addition to any rights now or hereafter granted under applicable
law, and not by way of limitation of any such rights, upon and after the
occurrence of any Default or Event of Default, the Lender and any participant
with the Lender in the Loans are hereby authorized by the Borrower at any time
or from time to time, without notice to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and to
apply any and all deposits (general or special, time or demand, including, but
not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
the Lender or any participant to or for the credit or the account of the
Borrower against and on account of the Secured Obligations irrespective or
whether or not (a) the Lender shall have made any demand under this Agreement or
any of the Loan Documents, or (b) the Lender shall have declared any or all of
the Secured Obligations to
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be due and payable as permitted by SECTION 11.2 and although such Secured
Obligations shall be contingent or unmatured.
Section 12.5 LITIGATION.
EACH OF THE LENDER AND THE BORROWER HEREBY KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR
NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE
BORROWER OR THE LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY
ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN
THE BORROWER AND THE LENDER OF ANY KIND OR NATURE. THE BORROWER AND THE LENDER
HEREBY AGREE THAT THE FEDERAL COURT OF THE WESTERN DISTRICT OF MISSOURI OR, AT
THE OPTION OF THE LENDER, ANY COURT IN WHICH THE LENDER SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY AND WHICH SITS IN A JURISDICTION IN WHICH THE BORROWER TRANSACTS
BUSINESS SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN THE BORROWER AND THE LENDER, PERTAINING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER ARISING
THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY
WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS
ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
BORROWER AT THE ADDRESS SET FORTH IN SECTION 12.1(B), WHICH SERVICE SHALL BE
DEEMED MADE UPON RECEIPT THEREOF. THE NON-EXCLUSIVE CHOICE OF FORUM SET FORTH IN
THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION. NOTWITHSTANDING ING TO THE
CONTRARY CONTAINED HEREIN, EXCEPTING THE LIMITED PROVISIONS OF SECTION 7.9(C)
HEREOF, NOTHING CONTAINED IN THIS AGREEMENT SHALL BE CONSTRUED AS LENDER'S
CONSENT TO SUBMIT ANY DISPUTES, DISAGREEMENTS OR OTHER ISSUES OF ANY KIND
WHATSOEVER UNDER THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS TO ARBITRATION,
MEDIATION OR ANY OTHER FORM OF ALTERNATIVE DISPUTE RESOLUTION.
Section 12.6 WAIVER OF RIGHTS.
THE BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVES
ALL RIGHTS WHICH THE BORROWER HAS UNDER APPLICABLE LAW TO NOTICE AND TO A
JUDICIAL HEARING PRIOR TO THE ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE
LENDER, ITS SUCCESSORS AND ASSIGNS TO POSSESSION OF THE COLLATERAL UPON DEFAULT
OR EVENT OF DEFAULT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING AND
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WITHOUT LIMITING ANY OTHER RIGHT WHICH THE LENDER MAY HAVE, THE BORROWER
CONSENTS THAT, IF THE LENDER FILES A PETITION FOR AN IMMEDIATE WRIT OF
POSSESSION UNDER APPLICABLE LAW AND THIS WAIVER OR A COPY HEREOF IS ALLEGED IN
SUCH PETITION AND ATTACHED THERETO, THE COURT BEFORE WHICH SUCH PETITION IS
FILED MAY DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE
FORTHWITH AN IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH APPLICABLE LAW,
WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE MAY BE REQUIRED BY
APPLICABLE LAW. THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS READ AND FULLY
UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT HEREOF.
Section 12.7 REVERSAL OF PAYMENTS.
To the extent the Borrower makes a payment or payments to the Lender
or the Lender receives any payment or proceeds of the Collateral for the
Borrower's benefit, which payment(s) or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, the
Lender shall have the continuing and exclusive right to apply, reverse and
re-apply any and all payments to any portion of the Secured Obligations, and, to
the extent of such payment or proceeds received, the Secured Obligations or part
thereof intended to be satisfied shall be revived and continued in full force
and effect, as if such payment or proceeds had not been received by the Lender.
Section 12.8 INJUNCTIVE RELIEF.
The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lender;
therefore, the Borrower agrees that the Lender, at the Lender's option, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
Section 12.9 ACCOUNTING MATTERS.
All financial and accounting calculations, measurements and
computations made for any purpose relating to this Agreement, including, without
limitation, all computations utilized by the Borrower to determine whether it is
in compliance with any covenant contained herein, shall, unless there is an
express written direction or consent by the Lender to the contrary, be performed
in accordance with GAAP.
Section 12.10 ASSIGNMENT; PARTICIPATION.
All the provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or transfer any of its rights
under this Agreement. The Lender may assign to one or more Persons, or sell
participations to one or more Persons in, all or a portion of its rights and
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obligations hereunder and under the Note and, in connection with any such
assignment or sale of a participation, may assign its rights and obligations
under the Security Documents. The Lender may, in connection with any assignment
or proposed assignment or sale or proposed sale of a participation, disclose to
the assignee or proposed assignee or participant or proposed participant any
information relating to the Borrower furnished to the Lender by or on behalf of
the Borrower, provided that such assignee, proposed assignee, participant or
proposed participant agrees to keep such information confidential.
Section 12.11 AMENDMENTS.
Any term, covenant, agreement or condition of this Agreement or any
of the other Loan Documents may be amended or waived and any departure therefrom
may be consented to if, but only if, such amendment, waiver or consent is in
writing signed by the Lender and, in the case of an amendment, by the Borrower.
Unless otherwise specified in such waiver or consent, a waiver or consent given
hereunder shall be effective only in the specific instance and for the specific
purpose for which given.
Section 12.12 PERFORMANCE OF BORROWER'S DUTIES.
The Borrower's obligations under this Agreement and each of the Loan
Documents shall be performed by the Borrower at its sole cost and expense. If
the Borrower shall fail to do any act or thing which it has covenanted to do
under this Agreement or any of the Loan Documents, the Lender may (but shall not
be obligated to) do the same or cause it to be done either in the name of the
Lender or in the name and on behalf of the Borrower, and the Borrower hereby
irrevocably authorizes the Lender so to act.
Section 12.13 INDEMNIFICATION.
The Borrower agrees to reimburse the Lender for all reasonable costs
and expenses, including counsel fees and disbursements, incurred and to
indemnify and hold the Lender harmless from and against all losses suffered by
the Lender, other than losses resulting from the Lender's gross negligence or
willful misconduct, in connection with (a) the exercise by the Lender of any
right or remedy granted to it under this Agreement or any of the Loan Documents,
(b) any claim, and the prosecution or defense thereof, arising out of or in any
way connected with this Agreement or any of the Loan Documents, except in the
case of a dispute between the Borrower and the Lender in which the Borrower
prevails in a final unappealed or unappealable judgment, and (c) the collection
or enforcement of the Secured Obligations or any of them.
Section 12.14 ALL POWERS COUPLED WITH INTEREST.
All powers of attorney and other authorizations granted to the
Lender and any Persons designated by the Lender pursuant to any provisions of
this Agreement or any of the Loan Documents shall be deemed coupled with an
interest and shall be irrevocable so long as any of the Secured Obligations
remain unpaid or unsatisfied or the Revolving Credit Facility has not been
terminated.
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<PAGE>
Section 12.15 SURVIVAL.
Notwithstanding any termination of this Agreement, (a) until all
Secured Obligations have been paid in full and the Revolving Credit Facility
terminated, the Lender shall retain its Security Interest and shall retain all
rights under this Agreement and each of the Security Documents with respect to
the Collateral as fully as though this Agreement had not been terminated, and
(b) the indemnities to which the Lender is entitled under the provisions of this
Article 12 and any other provision of this Agreement and the Loan Documents
shall continue in full force and effect and shall protect the Lender against
events arising after such termination as well as before.
Section 12.16 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement or any other Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining provisions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 12.17 GOVERNING LAW.
This Agreement, the Note and all other Loan Documents shall be
construed in accordance with and governed by the law of the State of Missouri
except as expressly provided therein.
Section 12.18 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all
parties, their successors and assigns, and all of which taken together shall
constitute one and the same agreement.
Section 12.19 REPRODUCTION OF DOCUMENTS.
This Agreement, each of the Loan Documents and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents received by the
Lender, and (c) financial statements, certificates and other information
previously or hereafter furnished to the Lender, may be reproduced by the Lender
by any photographic, photostatic, microcard, microfilm, miniature photographic
or other similar process, and the Lender may destroy any original document so
reproduced. Each party hereto stipulates that, to the extent permitted by
applicable laws any such reproduction shall be as admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original shall be in existence and whether or not such reproduction was made by
such Lender in the regular course of business), and any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
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<PAGE>
Section 12.20 FUNDS TRANSFER SERVICES.
(a) The Borrower acknowledges that the Lender has made available to
it a description of security procedures regarding funds transfers executed by
the Lender or an affiliate bank at the request of such Borrower (the "Security
Procedures"). The Borrower and the Lender agree that the Security Procedures are
commercially reasonable. The Borrower further acknowledges that the full scope
of the Security Procedures which the Lender or such affiliate bank offers and
strongly recommends for funds transfers is available only if the Borrower
communicates directly with the Lender or such affiliate bank as applicable in
accordance with said procedures. If the Borrower attempts to communicate by any
other method or otherwise not in accordance with the Security Procedures, the
Lender or such affiliate bank, as applicable, shall not be required to execute
such instructions, but if the Lender or such affiliate bank, as applicable, does
so, the Borrower will be deemed to have refused the Security Procedures that the
Lender or such affiliate bank, as applicable, offers and strongly recommends,
and the Borrower will be bound by any funds transfer, whether or not authorized,
which is issued in the Borrower's name and accepted by the Lender or such
affiliate bank, as applicable, in good faith. The Lender or such affiliate bank,
as applicable, may modify the Security Procedures at such time or times and in
such manner as the Lender or such affiliate bank, as applicable, in its sole
discretion, deems appropriate to meet prevailing standards of good banking
practice. By continuing to use the Lender's or such affiliate bank's, as
applicable, wire transfer services after receipt of any modification of the
Security Procedures, the Borrower agrees that the Security Procedures, as
modified, are likewise commercially reasonable. The Borrower further agrees to
establish and maintain procedures to safeguard the Security Procedures and any
information related thereto.
(b) The Lender or such affiliate bank, as applicable, will generally
use the Fedwire funds transfer system for domestic funds transfers, and the
funds transfer system operated by the Society for Worldwide International
Financial Telecommunication (SWIFT) for international funds transfers.
International funds transfers may also be initiated through the Clearing House
InterBank Payment System (CHIPs) or international cable. However, the Lender or
such affiliate bank, as applicable, may use any means and routes that the Lender
or such affiliate bank, as applicable, in its sole discretion, may consider
suitable for the transmission of funds. Each payment order, or cancellation
thereof, carried out through a funds transfer system or a clearing house will be
governed by all applicable funds transfer system rules and clearing house rules
and clearing arrangements, whether or not the Lender or such affiliate bank, as
applicable, is a member of the system, clearing house or arrangement and the
Borrower acknowledges that the Lender's or such affiliate bank's, as applicable,
right to reverse, adjust, stop payment or delay posting of an executed payment
order is subject to the laws, regulations, rules, circulars and arrangements
described herein.
Section 12.21 CONSENT TO ADVERTISING AND PUBLICITY.
The Borrower agrees that the Lender may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, including the name and address of the Borrower and the amount
and a general description of the credit facilities provided hereunder.
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<PAGE>
Section 12.22 FINAL AGREEMENT.
This Agreement and the other Loan Documents are intended by the
parties hereto as the final, complete and exclusive expression of the agreement
among them with respect to the subject matter hereof and thereof. This Agreement
and the other Loan Documents supersede any and all prior oral or written
agreements between the parties hereto relating to the subject matter hereof and
thereof.
Section 12.23 MO. REV. STAT. SECTION 432.045 NOTICE.
The following notice is given to comply with Mo. Rev. Stat.
Section 432.045:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT THE BORROWER AND THE LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY THE BORROWER AND
THE LENDER COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES HERETO,
EXCEPT AS THE PARTIES HERETO MAY LATER AGREE IN WRITING TO MODIFY IT.
Section 12.24 K.S.A. 16-117 AND 16-118 NOTICE.
The following notice is given to comply with K.S.A. 16-117 and
16-118:
THIS IS THE FINAL EXPRESSION OF THE LOAN AND SECURITY AGREEMENT
BETWEEN BORROWER AND LENDER. THIS LOAN AND SECURITY AGREEMENT CANNOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL CREDIT AGREEMENT OR OF A
CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWER AND LENDER. THE FOLLOWING
SPACE (WHICH THE PARTIES HERETO AGREE IS SUFFICIENT SPACE) IS PROVIDED FOR THE
PLACEMENT OF NONSTANDARD TERMS, IF ANY (IF THERE ARE NO NONSTANDARD TERMS TO BE
ADDED, STATE "NONE"):
__________________________NONE__________________________________
________________________________________________________________
________________________________________________________________
BY SIGNING BELOW, BORROWER AND LENDER HEREBY AFFIRM THAT THERE IS NO
UNWRITTEN ORAL CREDIT AGREEMENT BETWEEN THEMSELVES WITH RESPECT TO THE SUBJECT
MATTER OF THIS WRITTEN CREDIT AGREEMENT.
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<PAGE>
Section 12.25. YEAR 2000.
The Company has (i) initiated a review and assessment of all areas
within its and each of its Subsidiaries' business operations (including those
affected by suppliers, vendors and customers) that could be adversely affected
by the "Year 2000 Problem" (that is, the risk that computer applications used by
the Company or any of its Subsidiaries (or suppliers, vendors and customers) may
be unable to recognize and perform properly dated-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. Based on
the foregoing, the Company believes that all computer applications (including
those of its suppliers, vendors and customers) that are material to its or any
of its Subsidiaries' business and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to
the extent that a failure to do so could not reasonably be expected to have a
Materially Adverse Effect.
[Remainder of Page Intentionally Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in Kansas City, Missouri by their duly authorized officers in
several counterparts all as of the day and year first written above.
BORROWER:
AIRPORT SYSTEMS INTERNATIONAL,
INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
DCI, INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
LENDER:
BANK OF AMERICA, N.A.
By:_____________________________
Name:___________________________
Title:__________________________
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<PAGE>
EXHIBIT "A-1"
REVOLVING CREDIT NOTE B
$3,000,000 Date: February 7, 2000
FOR VALUE RECEIVED, on February 7, 2000 the undersigned promises to
pay to the order of BANK OF AMERICA, N.A., (hereinafter, together with any
holder hereof, called "HOLDER") at Kansas City, Missouri (or at such other place
as the Holder may designate in writing to the undersigned) the principal amount
of Three Million and No/100 Dollars ($3,000,000.00) or so much thereof as has
been advanced hereunder.
The undersigned shall pay interest as provided in that certain Loan
and Security Agreement between the undersigned and Holder dated February 7,
2000 (the "LOAN AGREEMENT"). Unless otherwise defined herein, defined terms
shall have the same meaning as in the Loan Agreement.
It is contemplated that the principal sum evidenced by this Note may
be reduced from time to time and that additional advances may be made from time
to time, as provided in the Loan Agreement; provided, however, that the
outstanding principal amount evidenced by this Note shall not exceed the maximum
amount provided in the Loan Agreement.
This Note is subject to the terms and conditions of, and entitled to
the benefit of the Collateral described in, the Loan Agreement. Capitalized
terms not defined herein shall have the meanings given in the Loan Agreement.
No delay or failure on the part of the Holder in the exercise of any
right or remedy hereunder, under the Loan Agreement, the Security Documents or
at law or in equity, shall operate as a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy hereunder, under the Loan
Agreement, the Security Documents, or at law or in equity shall preclude or
estop another or further exercise thereof or the exercise of any other right or
remedy.
Principal and interest on this Note shall be payable and paid in
lawful money of the United States of America.
The undersigned and all endorsers waive presentment, notice of
dishonor and protest.
Time is of the essence of this Note and, in case this Note is
collected by law or through an attorney at law, or under advice therefrom, the
undersigned agrees to pay all costs of collection, including reasonable
attorneys' fees if collected by or through an attorney.
The provisions of this Note shall be construed and interpreted and
all rights and obligations of the parties hereunder determined in accordance
with the laws of the State of Missouri.
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<PAGE>
THIS REVOLVING CREDIT NOTE "B" EVIDENCES, IN PART, THE SAME
INDEBTEDNESS AS EVIDENCED BY DOCUMENTATION RELATING TO THE "EXISTING LOANS" (AS
SUCH TERM IS DEFINED IN THE LOAN AGREEMENT). THIS REVOVING CREDIT NOTE "B" IS
SECURED BY ALL OF THE SAME COLLATERAL AS THE EXISTING LOANS PURSUANT TO THE
TERMS OF THE LOAN AGREEMENT AND RELATED LOAN DOCUMENTS. ALL FUTURE ADVANCES MADE
TO THE MAKER WILL ALSO BE SECURED BY THE LOAN DOCUMENTS. THIS REVOLVING NOTE "B"
IS, IN PART, A RESTATEMENT OF THE EXISTING LOANS AND THE DOCUMENTS RELATING
THERETO, AND ITS EXECUTION AND DELIVERY DOES NOT EVIDENCE A CANCELLATION OF THE
INDEBTEDNESS EVIDENCED BY THE PRIOR DOCUMENTS.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed, sealed and delivered in Kansas City, Missouri, in its corporate name,
by and through its respective duly authorized officers, as of the day and year
first above written.
BORROWER:
AIRPORT SYSTEMS INTERNATIONAL,
INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
DCI, INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
-74-
<PAGE>
EXHIBIT "A-2"
TERM NOTE A
$328,000 Date: February 7, 2000
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
BANK OF AMERICA, N.A. (together with any holder hereof, called "HOLDER") with
offices located in Kansas City, Missouri, the principal sum of Three Hundred
Twenty-Eight Thousand and No/100 Dollars ($328,000.00) at the offices of Holder
at Kansas City, Missouri, or at any other place designated by Holder, in lawful
money of the United States, together with interest, said principal sum being
payable in equal monthly installments of $3,793.54 each, the first such
installment being due on the 15th day of March, 2000, and succeeding
installments being due on the same date of each successive month thereafter, and
a final installment of all unpaid principal due on the earlier of (i) the 15th
day of February, 2001, or (ii) concurrently upon the sale of the Olathe Property
(as defined in the Loan Agreement, as defined below). Interest on the unpaid
principal balance shall be due with each installment of principal at the rate
provided in the Loan and Security Agreement between the undersigned and Bank of
America, N.A. of even date (the "LOAN AGREEMENT"). Unless otherwise defined
herein, defined terms shall have the same meaning as in the Loan Agreement.
This Note is subject to the terms and conditions of, and entitled to
the benefits of the Collateral described in, the Loan Agreement. Capitalized
terms not defined herein shall have the meanings given in the Loan Agreement.
No delay or failure on the part of the Holder in the exercise of any
right or remedy hereunder, under the Loan Agreement, the Security Documents or
at law or in equity, shall operate as a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy hereunder, under the Loan
Agreement, the Security Documents, or at law or in equity shall preclude or
estop another or further exercise thereof or the exercise of any other right or
remedy.
Principal and interest on this Note shall be payable and paid in
lawful money of the United States of America.
The undersigned and all endorsers waive presentment, notice of
dishonor and protest.
Time is of the essence of this Note and, in case this Note is
collected by law or through an attorney at law, or under advice therefrom, the
undersigned agrees to pay all costs of collection, including reasonable
attorneys' fees if collected by or through an attorney.
The provisions of this Note shall be construed and interpreted and
all rights and obligations of the parties hereunder determined in accordance
with the laws of the State of Missouri.
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<PAGE>
THIS TERM NOTE "A" EVIDENCES, IN PART, THE SAME INDEBTEDNESS AS
EVIDENCED BY DOCUMENTATION RELATING TO THE "EXISTING LOANS" (AS SUCH TERM IS
DEFINED IN THE LOAN AGREEMENT). THIS TERM NOTE "A" IS SECURED BY ALL OF THE SAME
COLLATERAL AS THE EXISTING LOANS PURSUANT TO THE TERMS OF THE LOAN AGREEMENT AND
RELATED LOAN DOCUMENTS. ALL FUTURE ADVANCES MADE TO THE MAKER WILL ALSO BE
SECURED BY THE LOAN DOCUMENTS. THIS TERM NOTE "A" IS, IN PART, A RESTATEMENT OF
THE EXISTING LOANS AND THE DOCUMENTS RELATING THERETO, AND ITS EXECUTION AND
DELIVERY DOES NOT EVIDENCE A CANCELLATION OF THE INDEBTEDNESS EVIDENCED BY THE
PRIOR DOCUMENTS.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed, sealed and delivered in Kansas City, Missouri, in its corporate name,
by and through its respective duly authorized officers, as of the day and year
first above written.
BORROWER:
AIRPORT SYSTEMS INTERNATIONAL,
INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
DCI, INC., A KANSAS CORPORATION
Attest:
By:_____________________________
By: Name:___________________________
-------------------------- Title:__________________________
Name:
Title:
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<PAGE>
EXHIBIT "A-3"
TERM NOTE B
$850,000 Date: February 7, 2000
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
BANK OF AMERICA, N.A. (together with any holder hereof, called "HOLDER") with
offices located in Kansas City, Missouri, the principal sum of Eight Hundred
Fifty Thousand and No/100 Dollars ($850,000.00) at the offices of Holder at
Kansas City, Missouri, or at any other place designated by Holder, in lawful
money of the United States, together with interest, said principal sum being
payable in equal monthly installments of $27,128.78 each, the first such
installment being due on the 15th day of March, 2000, and succeeding
installments being due on the same date of each successive month thereafter, and
a final installment of all unpaid principal due on the 15th day of February,
2003, and said interest on the unpaid principal balance shall be due with each
installment of principal at the rate provided in the Loan and Security Agreement
between the undersigned and Bank of America, N.A. of even date (the "LOAN
AGREEMENT"). Unless otherwise defined herein, defined terms shall have the same
meaning as in the Loan Agreement.
This Note is subject to the terms and conditions of, and entitled to
the benefits of the Collateral described in, the Loan Agreement. Capitalized
terms not defined herein shall have the meanings given in the Loan Agreement.
No delay or failure on the part of the Holder in the exercise of any
right or remedy hereunder, under the Loan Agreement, the Security Documents or
at law or in equity, shall operate as a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy hereunder, under the Loan
Agreement, the Security Documents, or at law or in equity shall preclude or
estop another or further exercise thereof or the exercise of any other right or
remedy.
Principal and interest on this Note shall be payable and paid in
lawful money of the United States of America.
The undersigned and all endorsers waive presentment, notice of
dishonor and protest.
Time is of the essence of this Note and, in case this Note is
collected by law or through an attorney at law, or under advice therefrom, the
undersigned agrees to pay all costs of collection, including reasonable
attorneys' fees if collected by or through an attorney.
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<PAGE>
The provisions of this Note shall be construed and interpreted and
all rights and obligations of the parties hereunder determined in accordance
with the laws of the State of Missouri.
THIS TERM NOTE "B" EVIDENCES, IN PART, THE SAME INDEBTEDNESS AS
EVIDENCED BY DOCUMENTATION RELATING TO THE "EXISTING LOANS" (AS SUCH TERM IS
DEFINED IN THE LOAN AGREEMENT). THIS TERM NOTE "B" IS SECURED BY ALL OF THE SAME
COLLATERAL AS THE EXISTING LOANS PURSUANT TO THE TERMS OF THE LOAN AGREEMENT AND
RELATED LOAN DOCUMENTS. ALL FUTURE ADVANCES MADE TO THE MAKER WILL ALSO BE
SECURED BY THE LOAN DOCUMENTS. THIS TERM NOTE "B" IS, IN PART, A RESTATEMENT OF
THE EXISTING LOANS AND THE DOCUMENTS RELATING THERETO, AND ITS EXECUTION AND
DELIVERY DOES NOT EVIDENCE A CANCELLATION OF THE INDEBTEDNESS EVIDENCED BY THE
PRIOR DOCUMENTS.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed, sealed and delivered in Kansas City, Missouri, in its corporate name,
by and through its respective duly authorized officers, as of the day and year
first above written.
BORROWER:
AIRPORT SYSTEMS INTERNATIONAL,
INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
DCI, INC., A KANSAS CORPORATION
Attest: By:_____________________________
Name:___________________________
By: Title:__________________________
--------------------------
Name:
Title:
-78-
<PAGE>
EXHIBIT C
COPIES OF SUBORDINATED NOTES
-79-
<PAGE>
EXHIBIT D
EXIMBANK FINANCING DOCUMENTS
-80-
<PAGE>
EXHIBIT E
[Existing Loans]
-81-
<PAGE>
LOAN AND SECURITY AGREEMENT
Dated as of February 7, 2000
Between
AIRPORT SYSTEMS INTERNATIONAL, INC.
AND
DCI, INC.
(the Borrower)
and
BANK OF AMERICA, N.A.
(the Lender)
<PAGE>
TABLE OF CONTENTS
EXHIBITS AND SCHEDULES
EXHIBIT A-1 FORM OF REVOLVING CREDIT NOTE B
EXHIBIT A-2 FORM OF TERM NOTE A
EXHIBIT A-3 FORM OF TERM NOTE B
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C COPIES OF SUBORDINATED NOTES
EXHIBIT D EXIMBANK FINANCING DOCUMENTS
EXHIBIT E EXISTING LOANS
SCHEDULE 5.1(a) Jurisdictions in Which Borrower is Qualified as a
Foreign Corporation
SCHEDULE 5.1(b) Borrower's Capital Stock
SCHEDULE 5.1(e) Borrower's Business
SCHEDULE 5.1(f) Exceptions to Governmental Approvals
SCHEDULE 5.1(g) Non Lien Title Exceptions and Defects and Property
Disposed of Out of Ordinary Course of Business
SCHEDULE 5.1(h) Liens
SCHEDULE 5.1(i) Indebtedness for Money Borrowed and Guaranties
SCHEDULE 5.1(j) Litigation
SCHEDULE 5.1(k) Tax Returns and Payments
SCHEDULE 5.1(o) ERISA
SCHEDULE 5.1(t) Location of Chief Executive Office
SCHEDULE 5.1(u) Locations of Inventory
SCHEDULE 5.1(v) Locations of Equipment
SCHEDULE 5.1(w) Corporate and Fictitious Names
SCHEDULE 5.1(z) Employee Relations
SCHEDULE 5.1(aa) Intellectual Property
SCHEDULE 5.1(bb) Real Property
SCHEDULE 5.1(cc) Environmental Matters
SCHEDULE 8.6 Use of Proceeds
AIRPORT SYSTEMS INTERNATIONAL, INC.
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of February 7, 2000, by and among Airport
Systems International, Inc., a Kansas corporation ("ASII"), Chris I. Hammond,
William D. Cook and Larry C. Klusman (each of them, an "Investor" and
collectively, the "Investors").
WHEREAS, pursuant to that certain Stock Purchase Agreement to be entered
into by and among ASII, DCI, Inc., ("DCI") and the Investors (the "Stock
Purchase Agreement"), ASII shall purchase all of the issued and outstanding
stock of DCI from Investors (the "Acquisition") and the Investors shall receive,
as partial consideration for such stock, common stock of ASII, par value $.01
per share ("ASII Common Stock"), resulting in the issuance of an aggregate of
150,000 shares of ASII Common Stock.
WHEREAS, pursuant to the terms of the Stock Purchase Agreement, the
Investors shall be granted certain registration rights and ASII shall register
the ASII Common Stock received by the Investors for resale pursuant to the terms
set forth in this Agreement (the "Requested Registration").
NOW, THEREFORE, in consideration of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as
follows:
Section 1. Definitions. The definitions set forth in the Stock
Purchase Agreement will apply to terms used in this Agreement. In addition,
the following terms shall have the following meanings:
(a) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(b) "Register," "registered" and "registration" refers to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with
applicable state securities laws of such states in which the Investors
notify ASII of their intention to offer Registrable Securities.
(c) "Registrable Securities" means all of the following, to the
extent the same have not been sold to the public, any and all ASII Common
Stock issued to the Investors pursuant to the Stock Purchase Agreement, or
(ii) stock issued in respect of stock referred to in (i) above in any
reorganization; or (iii) stock issued in respect of the stock referred to
in (i) or (ii) as a result of a stock split, stock dividend,
recapitalization or combination. Notwithstanding the foregoing,
Registrable Securities shall not include otherwise Registrable Securities
(i) sold to or through a broker in a transaction pursuant to Rule 144 or
otherwise exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(l) thereof so that all
transfer restrictions, and restrictive
<PAGE>
legends with respect thereto, if any, are removed upon the consummation of
such sale, or (ii) as to which the registration rights have been
terminated pursuant to this Agreement.
(d) "Rule 144" means Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the SEC from time to time.
(e) "Securities Act" means the Securities Act of 1933, as amended.
Section 2. DEMAND REGISTRATION.
(a) DEMAND BY THE INVESTORS
(i) Subject to (ii) and (iii) below, at any time during the Demand
Period, as defined in Section 8 below, ASII, upon the written demand of the
Investors, will, as soon as is practicable, use commercially reasonable efforts
to effect the registration under the Securities Act of that number of shares of
the Registrable Securities as are specified by the Investors in such written
demand.
(ii) ASII's obligations under this Section 2(a) shall be subject to
the limitations set forth below, and ASII (i) shall not be obligated to cause
any special audit to be undertaken in connection with any registration under
this Section 2(a), (ii) at its sole discretion may offer a right to participate
in such registration statement to other holders of ASII's securities, and may
itself participate in such registration, (iii) shall be entitled to postpone for
a reasonable period of time, but not in excess of ninety (90) days, the filing
of any registration statement otherwise required to be prepared pursuant to this
Section 2(a) if ASII is, at such time, conducting or about to conduct an
underwritten public offering of equity securities (or securities convertible
into equity securities) and is advised in writing by its managing underwriter
that such offering would in its opinion be adversely affected by the
registration so requested and (iv) shall be entitled to postpone such requested
registration for up to one hundred twenty (120) days if ASII determines
reasonably and in good faith, in view of the advisability of deferring public
disclosure of material corporate developments or other information, that such
registration and the disclosure required to be made pursuant thereto would not
be in the best interests of ASII at such time.
(iii) The Investors are entitled to make only one demand for
registration of the Registrable Securities under this Agreement. ASII's
obligation to register the Registrable Securities hereunder shall terminate at
such time as a registration demanded pursuant to this Section 2(a) is deemed
effective.
(b) REGISTRATION STATEMENT FORM. If any registration demanded pursuant to
this Section 2 which is proposed by ASII to be effected by the filing of a
registration statement on Form S-3 (or any successor or similar short-form
registration statement) shall be in connection with an underwritten public
offering, and if the managing underwriter shall advise ASII in writing that, in
its opinion, the use of another form of registration statement is of material
importance to the success of such proposed offering, then such registration
shall be effected on such other form.
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Upon execution of this Agreement, ASII shall use its reasonable efforts to
register the Registrable Securities when demanded by the Investors, for resale
on or before the expiration of the Demand Period; PROVIDED, HOWEVER, that ASII
shall not be obligated to register the Registrable Securities in any particular
state in which ASII would be required to: (i) qualify to do business as a
foreign corporation and where it would not otherwise be required to so qualify,
(ii) subject itself to taxation in any such jurisdiction, or (iii) execute a
general consent to service of process in any such jurisdiction.
The registration of the Registrable Securities pursuant to this Agreement
shall not relieve the Investors of their respective obligations pursuant to the
terms of the Stock Purchase Agreement.
Section 3. EXPENSES OF REGISTRATION. In addition to the fees and expenses
contemplated by Section 4 hereof, all expenses incurred in connection with the
registration pursuant to Section 2 hereof, including without limitation all
registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel for ASII, and expenses of any special audits of ASII's
financial statements incidental to or required by such registration, shall be
borne by ASII, except that ASII shall not be required to pay (a) any fees and
expenses in order to amend or supplement the registration statement or
prospectus to reflect donees or pledges pursuant to Section 4(b) and (b) any
underwriters' fees, discounts or commissions relating to the sale of the
Registrable Securities. ASII shall not, under any circumstances, be required in
connection with a registration hereunder, to (x) conduct any road shows or
similar sales efforts for the Investors, (y) pay any expenses to the Investors
for any road shows or similar sales efforts, or (z) pay any fees and
disbursements of counsel(s) for the Investors.
Section 4. REGISTRATION PROCEDURES. In the case of the registration
effected by ASII pursuant to this Agreement, ASII will keep each of the
Investors advised in writing as to the initiation of registration and as to the
completion thereof. At its expense, ASII will use reasonable efforts to:
(a) keep such registration pursuant to Section 2 continuously
effective for such reasonable period as necessary to permit the Investors
to complete the distribution in the manner requested by the Investors and
described in the registration statement relating thereto, but in no event
beyond the date that is one year from the Closing Date of the Acquisition;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the
Securities Act, excluding any supplement or amendment required to name
donees or pledgees of Investors, and to keep such registration statement
effective for the applicable period of time specified in Section 4(a)
above;
(c) furnish such number of prospectuses and other documents incident
thereto as any of the Investors from time to time may reasonably request
and assist the Investors in satisfying their prospectus delivery
obligations by furnishing to any national securities exchange, including
the American Stock Exchange ("AMEX"), on which the Registrable
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Securities are then listed, copies of the prospectus and each amendment or
supplement thereto in accordance with Rule 153 under the Securities Act
(or any comparable rule then in existence);
(d) obtain the withdrawal of any order suspending the effectiveness
of a registration statement, or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction;
(e) subject to Section 2(b), register or qualify such Registrable
Securities for offer and sale under the securities or Blue Sky laws of
such jurisdictions as any of the Investors reasonably require, and keep
such registration or qualification effective for the applicable period
specified in Section 4(a) above;
(f) cause all Registrable Securities covered by such
registrations to be listed on AMEX;
(g) notify each of the Investors promptly of any request by the
SEC for the amending or supplementing of the registration statement or
prospectus or for additional information;
(h) advise each of the Investors, after ASII receives notice or
obtains knowledge of the issuance, of any order by the SEC suspending the
effectiveness of the registration statement or amendment thereto or of the
initiation or threatening of any proceeding for that purpose, and promptly
use reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal promptly if such stop order should be issued;
(i) use its best efforts to timely file with the SEC all of the
reports it is required to file under the Exchange Act as a prerequisite to
availability of Form S-3; and
(k) notify each Investor at any time a prospectus covered by such
registration statement is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge as a result
of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
Section 5. REGISTRATION COVENANTS OF THE INVESTORS. In consideration of
the benefits accruing to them pursuant to this Agreement and in addition to
their other obligations set forth in this Agreement, each of the Investors'
covenants and agrees to:
(a) cooperate with ASII, its counsel, advisors and other
representatives, and comply with all applicable provisions of law
(including without limitation the prospectus delivery requirements of the
Securities Act and Rule 10b-5 and Regulation M under the Exchange Act) in
connection with any registration effected pursuant to the provisions of
this Agreement;
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(b) promptly provide to ASII, in writing, such information as ASII
or its counsel deems necessary or appropriate for inclusion in the
registration statement, which information, when given, shall be true and
correct in all material respects and shall not omit any information
necessary to make the information furnished not misleading;
(c) execute all questionnaires, custody agreements, powers of
attorney or other documents as ASII may reasonably request;
(d) discontinue sales of Registrable Securities upon
notification of any stop order or suspension of the effectiveness of
the registration statement;
(e) notify ASII immediately upon any material change in the plan of
distribution or other information concerning any of the Investors
described in the prospectus;
(f) discontinue sales of Registrable Securities and use of the
related prospectus following notification by ASII that the registration
statement must be amended or supplemented;
(g) not use any prospectus other than the most recent
prospectus related to the registration statement;
(h) upon presentation of a stock certificate representing
Registrable Securities sold under the registration statement, certify that
the sale was made in accordance with the terms hereof and the plan of
distribution described in the Registration Statement; and
(i) notify ASII of any request by the SEC or any state securities
commission or agency for additional information or for such registration
statement or prospectus to be amended or supplemented.
In the event that an Investor fails to comply in any material respect with
its obligations pursuant to Sections 5(a) through (c), any Registrable
Securities held by such Investor may be excluded from the registration statement
and all of such Investor's rights pursuant to the Agreement shall terminate. In
the even that an Investor fails to comply in any material respect with its
obligations pursuant to Sections 5(d) through (i), all of such Investor's rights
pursuant to this Agreement shall terminate other than with respect to
Registrable Shares then registered on a Registration Statement.
Section 6. INDEMNIFICATION.
(a) ASII shall indemnify and hold harmless each of the Investors
against any losses, claims, damages or liabilities, joint or several, to
which such Investor may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment
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or supplement thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by ASII of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to ASII and relating
to action or inaction required of ASII in connection with any such
registration, and will reimburse each such Investor for any reasonable
legal and any other expenses incurred in connection with investigating,
defending or settling any such claim, loss, damage, liability or action;
PROVIDED, HOWEVER, that ASII will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is
based on (i) the failure of any Investor to comply in any material respect
with its obligations pursuant to Sections 5(d) through (i), or (ii) any
untrue statement or omission based upon information furnished to or
requested by ASII by or from any Investor for use therein.
(b) Each Investor will, if Registrable Securities held by or
issuable to such Investor are included in the securities as to which such
registration is being effected, indemnify and hold harmless ASII, each of
its directors and officers, each person who controls ASII, and each other
Investor, against all claims, losses, expenses, damages and liabilities
(or actions in respect thereof) arising out of or based on (i) the failure
of any Investor to comply in any material respect with its obligations
pursuant to Sections 5(d) through (i), or (ii) any untrue statement (or
alleged statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document or any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse ASII, each person who controls ASII, such directors or
officers, or such other Investors for any reasonable legal or any other
expenses incurred in connection with investigating, defending or settling
any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with information furnished to or requested
by ASII by or from such Investor specifically for use therein; PROVIDED,
HOWEVER, the total amount for which any Investor shall be liable under
this Section 6(b) shall not in any event exceed the aggregate proceeds
received by such Investor from the sale of Registrable Securities sold by
such Investor in such registration.
(c) Each party entitled to indemnification under this Section 6 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified
Party has actual knowledge of any claims as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the
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consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party
of a full and unconditional release from all liability in respect of such
claim or litigation.
(d) If the indemnification provided for in this Section 6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party thereunder, shall contribute the amount paid or
payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other hand in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense
as well as any other relevant equitable considerations. The relevant fault
of the Indemnifying Party and the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. Notwithstanding the foregoing, the amount any Investor shall be
obligated to contribute pursuant to this Section 6(d) shall be limited to
an amount equal to the proceeds to such Investor of the Registrable
Securities sold pursuant to the registration statement which gives rise to
such obligation to contribute (less the aggregate amount of any damages
which the Investor has otherwise been required to pay in respect of such
loss, claim, damage, liability or action or any substantially similar
loss, claim, damage, liability or action arising from the sale of such
Registrable Securities).
(e) The indemnification provided by this Section 6 shall be a
continuing right to indemnification and shall survive the registration and
sale of any securities by any person entitled to indemnification hereunder
and the expiration or termination of this Agreement.
Section 7. CERTIFICATE LEGENDS. Within five (5) business days after a
registration statement filed under Section 2 hereof becomes effective, ASII will
notify each Investor. Upon receipt of such notice, each Investor may return its
certificate representing the Registrable Securities and request that ASII issue
a new certificate in such Investor's name free of any restrictive legend
relating to compliance with federal securities laws and ASII shall take all
reasonable steps to do so; PROVIDED, HOWEVER, that ASII shall only be obligated
to remove the legend for that number of Registrable Securities which any
Investor represents is being sold pursuant to the registration statement.
Section 8. TERMINATION OF RIGHTS. All rights of the Investors to demand
registration of the Registrable Securities under this Agreement shall exist
during the period (the "Demand Period") commencing on the date hereof and
terminating at 5:00 P.M. Eastern time on the date one year after the date
hereof.
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Section 9. REPRESENTATIONS AND WARRANTIES OF ASII. ASII represents
and warrants to the Investors as follows:
(a) The execution, delivery and performance of this Agreement by
ASII has been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other
government agency, the Articles of Incorporation or the Bylaws of ASII or
any provision of any indenture, agreement or other instrument to which it
or any of its properties or assets is bound, conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument or result
in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of ASII.
(b) This Agreement has been duly executed and delivered by ASII and
constitutes the legal, valid and binding obligation of ASII, enforceable
in accordance with its terms, subject to (i) applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and moratorium laws and
other laws of general application affecting enforcement of creditors'
rights generally, and (ii) the availability of equitable remedies as such
remedies may be limited by equitable principles of general applicability
(regardless of whether enforcement is sought in a proceeding in equity or
at law).
Section 10. MISCELLANEOUS.
(a) AMENDMENTS. This Agreement may be amended only by a
writing signed by ASII and all of the Investors.
(b) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which shall constitute a single instrument.
(c) NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and may be sent by facsimile
transmission (with written confirmation of successful transmission), by
registered or certified mail, postage prepaid, or delivered by hand or by
messenger, addressed (a) if to an Investor, at such Investor's address set
forth on the books of ASII, or at such other address as such Investor
shall have furnished to ASII in writing pursuant to this Section, or (b)
if to ASII, to ASII's then current executive office address, or at such
other address as ASII shall have furnished to the Investors pursuant to
this Section. Each such notice or other communication shall for all
purposes of this Agreement be treated as effective or having been given
when delivered if delivered personally, or, if sent by registered or
certified mail or facsimile transmission, upon its receipt.
(e) SEVERABILITY. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any
manner affect or render illegal, invalid or unenforceable any other
provision of this Agreement, and this Agreement shall be carried out as if
any such illegal, invalid or unenforceable provision were not contained
herein.
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(f) DILUTION. If, and as often as, there is any change in the ASII
Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be
made in the provisions hereof so that the rights and privileges granted
hereby shall continue with respect to the ASII Common Stock as so changed.
(g) SPECIFIC PERFORMANCE. The parties hereto acknowledge that they
will be irreparably damaged in the event that this Agreement is not
specifically enforced. Upon any breach threatened, breach of the terms,
covenants or conditions of this Agreement by any party hereto, the other
party shall, in addition to all other remedies, be entitled to a temporary
permanent injunction, without showing any actual damage or posting any
bond, or a decree for specific performance, in accordance with the
provisions hereof.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Kansas without regard to
principles of conflict of law.
(i) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the
Investors without the prior written consent of ASII. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective
successors and assigns.
(j) ENTIRE AGREEMENT. This Agreement and the other documents
referred to herein and therein contain the entire understanding of the
parties with respect to the subject matter hereof. There are no
restrictions, promises, warranties, covenants or undertakings concerning
the subject matter other than those expressly set forth in this Agreement.
This Agreement supercedes all prior negotiations, agreements and
undertakings between the parties with respect to such subject matter.
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IN WITNESS HEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
AIRPORT SYSTEMS INTERNATIONAL, INC.
__________________________________
Keith Cowan, President
INVESTORS
__________________________________
Chris I. Hammond
__________________________________
William D. Cook
__________________________________
Larry C. Klusman
AIRPORT SYSTEMS INTERNATIONAL, INC.
INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of the 7th day of February, 2000, by and among AIRPORT SYSTEMS
INTERNATIONAL, INC., a Kansas corporation (the "Company"), and KCEP VENTURES II,
L.P., a Kansas limited partnership (the "Investor").
RECITALS
A. The Company proposes to sell and issue 198,413 shares of its common
stock (the "Initial Shares"), a convertible subordinated debenture in the amount
of $500,000 (the "Convertible Debenture"), and a warrant to purchase 45,635
shares of its common stock (the "Warrant") (the Initial Shares, the Convertible
Debenture and the Warrant are collectively referred to herein as the
"Securities") pursuant to that certain Investment Agreement of even date
herewith (the "Investment Agreement").
B. As a condition of entering into the Investment Agreement, the Investor
has requested that the Company grant to it certain rights (including, without
limitation, registration rights) as set forth below.
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Board of Directors" shall mean the Company's board of
directors, as it may exist from time to time.
(b) "Closing" shall mean the date as set forth in the Investment
Agreement.
(c) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
<PAGE>
(e) "DCI Stockholders" shall mean Chris I. Hammond, Larry C. Klusman
and William D. Cook who, by virtue of agreements with the Company, are
entitled to include their securities in certain registrations hereunder.
(f) "Registrable Securities" shall mean (i) any Initial Shares, (ii)
shares of common stock issued or issuable pursuant to the conversion of
the Convertible Debenture (the "Debenture Shares"), (iii) shares of common
stock issued or issuable pursuant to the exercise of the Warrant, and (iv)
any common stock issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the shares of common stock of
the Company referenced in (i)-(iii) above; provided, however, that
Registrable Securities shall not include any shares of common stock that
have previously been registered or which have been sold to the public.
(g) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
(h) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or special audits
incident to or required by any such registration (including all pre- and
post-effective amendments to the registration statements), and expenses
associated with the listing for quotation on the American Stock Exchange
of the Registrable Securities, but shall not include Selling Expenses and
fees and disbursements of counsel for the Investor, except for fees and
disbursements of counsel for the Investor or the Stockholders as provided
in Section 1.4 hereof, and shall not include the compensation of regular
employees of the Investor or the Stockholders, which shall be paid in any
event by the Investor or the Stockholders.
(i) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.
(j) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(l) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to a sale of Registrable Securities, fees
and disbursements of counsel for the Investor or the Stockholders, any
fees and expenses incurred in order to amend or supplement the
registration statement or prospectus to reflect transferees, donees, or
pledgees, or any costs or
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expenses related to any road shows or similar sales efforts on behalf of
the Investors or Stockholders.
(m) "Stockholders" shall mean the Investor and any persons or
entities to whom the registration rights conferred by this Agreement have
been transferred in compliance with Section 1.10 hereof.
1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive at any
time a written request from the Investor that the Company effect any
registration with respect to at least thirty percent (30%) of the
Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration
to all Stockholders and the DCI Stockholders; and
(ii) as soon as practicable, use commercially reasonable
efforts to effect such registration (including, without limitation,
filing post-effective amendments, obtaining appropriate
qualifications under applicable blue sky or other state securities
laws, and ensuring appropriate compliance with the Securities Act)
as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such
request by the Investor, together with all or such portion of the
Registrable Securities of any Stockholder joining in such request as
are specified in a written request received by the Company within
thirty (30) days after the written notice from the Company referred
to in subclause (i) above is mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.2:
(A) (i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification, or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act, or (ii) in any
particular jurisdiction in which the Company is not qualified to do
business or would be required to do business as a foreign
corporation and where it would not otherwise be required to so
qualify, or (iii) subject itself to taxation in any such
jurisdiction;
(B) After the Company has initiated two such registrations
pursuant to this Section 1.2(a) (counting for these purposes only
registrations which have been declared or ordered effective and
registrations which have been withdrawn by the Investor or the
Stockholders and as to which the Investor or any other Stockholder
has not elected to bear the Registration Expenses pursuant to
Section 1.4); or
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(C) If the Company is unable to obtain the commitment of an
underwriter to firmly underwrite the offering.
(b) FILING OF REGISTRATION STATEMENT. Subject to the foregoing
clauses (A) through (C), the Company shall file a registration statement
covering the Registrable Securities so requested to be registered as soon
as practicable after receipt of the request or requests of the Investor;
PROVIDED, HOWEVER, the Company: (i) at its sole discretion, may offer a
right to participate in such registration statement at such time to the
DCI Stockholders, (ii) shall be entitled to postpone for a reasonable
period of time, but not in excess of ninety (90) days, the filing of any
registration statement otherwise required to be prepared pursuant to this
Section 1.2 if Company is, at such time, conducting or about to conduct an
underwritten public offering of equity securities (or securities
convertible into equity securities) and is advised in writing by its
managing underwriter that such offering would in its opinion be adversely
affected by the registration so requested, and (iii) shall be entitled to
postpone such required registration for up to ninety (90) days if the
Company determines reasonably and in good faith, in view of the
advisability of deferring public disclosure of material corporate
developments or other information that such registration and the
disclosure required to be made pursuant thereto would not be in the best
interest of the Company at such time.
The registration statement filed pursuant to the request of the Investor
may, subject to the provisions of Sections 1.2(b) and 1.12 hereof, include other
securities of the Company, with respect to which registration rights have been
granted, and may include securities of the Company being sold for the account of
the Company.
(c) PROCEDURES. If Stockholders or the DCI Stockholders shall
request inclusion in any registration pursuant to this Section 1.2, the
Company shall offer to include such securities in the underwriting and may
condition such offer on its acceptance of the further applicable
provisions of this Section 1 (including Section 1.12 hereof). The Company
shall (together with all Stockholders) enter into an underwriting
agreement in customary form with the representative of the underwriter or
underwriters selected by the Company for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the
representative of the underwriters advises the Investor in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.12 hereof. If a
person who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company or the underwriter.
Any Registrable Securities or other securities excluded shall also be
withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such
registration was previously reduced as a result of marketing factors
pursuant to this Section 1.2(c), then the Company shall offer to all
Stockholders who have retained rights to include securities in the
registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among such Stockholders
requesting additional inclusion in accordance with Section 1.12 hereof.
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1.3 COMPANY REGISTRATIONS.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder exercising
demand registration rights (other than pursuant to Section 1.2 hereof),
other than a registration relating solely to employee benefit plans, a
registration relating solely to a Rule 145 transaction, or a registration
on any registration form that does not permit secondary sales, the Company
will:
(i) promptly give to all Stockholders written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), except as
set forth in Section 1.3(b) and Section 1.12 hereof, and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Stockholder
and received by the Company within thirty (30) days after the
written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify
all or a part of a Stockholder's Registrable Securities.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Stockholders as a part of the written notice
given pursuant to Section 1.3(a)(i) hereof. In such event, the right of
any Stockholder to registration pursuant to this Section 1.3 shall be
conditioned upon such Stockholder's participation in such underwriting and
the inclusion of such Stockholder's Registrable Securities in the
underwriting to the extent provided herein. All Stockholders proposing to
distribute their securities through such underwriting shall (together with
the Company) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by the
Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may exclude all Registrable Securities from, or limit the number
of Registrable Securities to be included in, the registration and underwriting.
The Company shall so advise all Stockholders of securities holders requesting
registration, and the number of shares that are entitled to be included in the
registration and underwriting (other than on behalf of the Company) as set forth
in Section 1.12 hereof. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an
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aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.12 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof, and the two registrations pursuant to Section 1.2 hereof
shall be borne by the Company; provided, however, that if the Investor or any
other Stockholder pays all the Registration Expenses for any registration
proceeding begun pursuant to Section 1.2 hereof which is subsequently withdrawn
by the Investor, such registration proceeding shall not be counted as a
requested registration pursuant to Section 1.2 hereof. Notwithstanding the
foregoing, in the event that a withdrawal is based upon material adverse
information relating to the Company that is different from the information known
or available (upon request from the Company or otherwise) to the Investor at the
time of its request for registration under Section 1.2 hereof, the Company will
bear the Registration Expenses, and such registration shall not be treated as a
counted registration for purposes of Section 1.2 hereof, even though the
Investor does not bear the Registration Expenses for such registration. All
Selling Expenses relating to securities so registered shall be borne by the
holders of such securities pro rata on the basis of the amount of securities so
registered on their behalf. The Company shall not, under any circumstances, be
required in connection with a registration hereunder, to (x) conduct any road
shows or similar sales efforts for the Investor, (y) pay any expenses to the
Investor for any road shows or similar sales efforts, or (z) pay any fees and
disbursements of counsel for the Investor.
1.5 REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to Section 1, the Company will keep each Stockholder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
eighty (180) days or until the Stockholders have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that such one hundred eighty
(180) day period shall be extended for a period of time equal to the
period the Stockholder refrains from selling any securities included in
such registration at the request of an underwriter of common stock (or
other securities) of the Company.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Stockholder or Underwriter from time to time may reasonably request in
order to facilitate the public offering of such securities;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the
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Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light
of the circumstances then existing; and
(e) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company
will enter into an underwriting agreement reasonably necessary to effect
the offer and sale of common stock, provided such underwriting agreement
contains customary indemnification provisions and provided further that if
the underwriter so requests the underwriting agreement will contain
customary contribution provisions.
1.6 INDEMNIFICATION.
(a) The Company will indemnify the Investor, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling the Investor within the meaning of section 15 of the
Securities Act, to the extent any registration, qualification, or
compliance is effected on its behalf, pursuant to this Section 1, and each
underwriter, if any, and each person who controls within the meaning of
section 15 of the Securities Act any underwriter, against all expenses,
claims, losses, damages, and liabilities (or actions, proceedings, or
settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act, the Exchange Act,
any state securities laws or any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company
in connection with any such registration, qualification, or compliance,
and will reimburse the Investor, each of its officers, directors,
partners, legal counsel, and accountants and each person controlling the
Investor, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim,
loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission to the Company by the Investor, any Stockholder or any
underwriter and stated to be specifically for use therein. It is agreed
that the indemnity agreement contained in this Section 1.6(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld).
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(b) The Investor will, to the extent Registrable Securities, are
included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify the Company, each of its
directors, officers, stockholders, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by a registration
statement, each person who controls the Company or such underwriter within
the meaning of section 15 of the Securities Act, and each of their
officers, directors, and partners, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse the
Company, its directors, officers, partners, legal counsel, and
accountants, persons, underwriters, or control persons for any legal and
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case
to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with information provided to
the Company by the Investor and stated to be specifically for use therein;
PROVIDED, however, that the obligations of the Investor hereunder shall
not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect thereof) if such settlement
is effected without the consent of the Investor (which consent shall not
be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is held
by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party hereunder, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand
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and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
1.7 INFORMATION BY STOCKHOLDER. Each Stockholder of Registrable Securities
shall furnish to the Company such information regarding such Stockholder and the
distribution proposed by such Stockholder as the Company may reasonably request
and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.8 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. Without the
consent of the Investor and except for the rights granted to the DCI
Stockholders, the Company shall not grant any registration rights which are
senior to the rights of the Investor hereunder.
1.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time;
(c) So long as the Investor owns any Registrable Securities, furnish
to the Investor forthwith upon written request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144,
and of the Securities Act and the Exchange, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as the Investor may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Investor
to sell any such securities without registration.
1.10 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to the Investor by the Company under
this Section 1 may be transferred or assigned by the Investor only to a
transferee or assignee of not less than fifty-one percent (51%) of the
Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits, and the
like), provided that the
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Company is given written notice at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or assignee of such rights assumes the obligations of the Investor
under this Agreement in a writing delivered to the Company. Upon consummation of
such transfer or assignment, the Investor shall no longer be able to exercise
the rights and shall not incur further obligations attributed to the "Investor"
hereunder.
1.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of common stock (or other securities) of the Company, the
Stockholders shall not sell or otherwise transfer or dispose of any common stock
(or other securities) of the Company held by such holder (other than those
included in the registration) during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed
under the Securities Act; provided, that all officers and directors of the
Company and all other persons holding five percent (5%) or more of the Company's
outstanding stock enter into similar agreements and provided further, that the
Stockholders shall not be so prohibited from selling or otherwise transferring
or disposing of any common stock (or other securities) of the Company if a
Stockholder seeks inclusion in such registration but is unable to participate as
a result of the limitations provided in Section 1.3(b) and Section 1.12 of this
Agreement.
The obligations described in this Section 1.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such one hundred eighty (180) day
period.
1.12 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities and securities of the Company held by
others who have been granted registration rights, including the DCI
Stockholders, (the "Other Shares") are the subject of a request to be included
in a registration and cannot be so included as a result of limitations on the
aggregate number of shares of Registrable Securities and Other Shares that may
be so included, the number of shares of Registrable Securities and Other Shares
that may be so included shall be allocated among those requesting inclusion of
shares as follows:
(a) Upon a request for registration by the Investor pursuant to
Section 1.2, the Other Shares to be included in such registration shall be
reduced pro rata among the holders of such shares to the extent necessary
to accommodate the sale of ALL of the Registrable Securities by the
Investor and Stockholders, even if such reduction may eliminate the
opportunity for the sale of Other Shares. If, after the Other Shares are
eliminated from such registration, limitations remain on the Registrable
Securities to be included in such registration, the Registrable Securities
to be included shall be reduced on a pro rata basis among the Investor and
the Stockholders.
(b) Upon a registration proposed by another holder of Company
securities pursuant to Section 1.3, the Registrable Securities to be
included in such registration shall be
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reduced pro rata among the Investor and the Stockholders to the extent
necessary to accommodate the sale of ALL of the Other Shares by such other
holder, even if such reduction may eliminate the opportunity for the sale
of the Registrable Securities.
(c) Upon a registration proposed by the Company pursuant to Section
1.3, the number of Registrable Securities and Other Shares to be included
in such registration shall, AFTER the inclusion of all shares proposed for
sale by the Company, be allocated pro rata on the basis of the number of
shares of Registrable Securities and Other Shares that would be held by
the Investor, the holders, and stockholders of Other Shares, assuming
conversion; provided, however, so that such allocation shall not operate
to reduce the aggregate number of Registrable Securities to be included in
such registration below twenty-five percent (25%) of the total amount of
securities included in such offering. If the Investor, the Stockholder, or
other security holders do not request inclusion of the maximum number of
shares of Registrable Securities and Other Shares allocated to him
pursuant to the above-described procedure, the remaining portion of his
allocation shall be reallocated among those requesting Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the
number of shares of Registrable Securities and Other Shares which would be
held by such Stockholders, assuming conversion, and this procedure shall
be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the
Stockholders have been so allocated.
(d) The Company shall not limit the number of Registrable Securities
to be included in a registration pursuant to this Agreement in order to
include shares held by stockholders with no registration rights. To
facilitate the allocation of Securities in accordance with the above
provisions, the Company or the Underwriters may round the number of
Securities allocated to any Stockholder to the nearest 100 Securities.
1.13 DELAY OF REGISTRATION. The Investor shall not have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The right of the Investor to
request registration or inclusion in any registration pursuant to Section 1.2 or
1.3 hereof shall terminate on the closing of an acquisition of the Registrable
Securities in exchange for publicly traded stock of another entity.
SECTION 2
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as the Investor owns
Securities or Registrable Securities representing not less than fifty percent
(50%) of the total potential amount of Registrable Securities, as follows:
2.1 BASIC FINANCIAL INFORMATION. The Company will furnish to the Investor
the following upon request:
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(a) Within 90 days after the end of each fiscal year of the Company,
a balance sheet of the Company as of the end of such fiscal year and
statements of income and of changes in financial condition of the Company
for such year (A) prepared in accordance with generally accepted
accounting principles, (B) audited by an independent accounting firm
reasonably acceptable to Investor, and (C) including such other
information as is necessary to verify the financial conditions of the
Company.
(b) Within 30 days after the end of each calendar month (other than
a calendar month during which any fiscal quarter or fiscal year of the
Company ends), an unaudited balance sheet of the Company as of the end of
such month and unaudited statements of income and of changes in financial
condition of the Company for such month and for the current fiscal year to
the end of such month;
(c) As soon as available, but in any event within 30 days after
commencement of each new fiscal year, a business plan that shall contain
projected quarterly and annual financial statements and quarterly and
annual operating and capital budgets for such fiscal year, which such plan
shall be submitted to Company's Board of Directors for approval within
such time; and
(d) With reasonable promptness, such other information and financial
data concerning the Company as Investor may reasonably request, including,
without limitation, quarterly and annual budgets and summaries of
financial plans.
2.2 FUTURE INVESTMENTS. In the event Company shall commence a private
equity financing within five years subsequent to the date of this Agreement,
Investor shall have the right to purchase the number of shares necessary to
maintain its percentage interest in the common stock of the Company.
SECTION 3
BOARD REPRESENTATION
3.1 BOARD OF DIRECTORS. So long as the Convertible Debenture purchased by
Investor pursuant to the Investment Agreement remains outstanding and is not
converted into shares of common stock of the Company, and thereafter so long as
KCEP Ventures II, L.P. beneficially owns Securities or Registrable Securities
representing not less than fifty percent (50%) of the total potential amount of
Registrable Securities, the Board of Directors of the Company shall nominate and
recommend to the stockholders of the Company for election a person designated by
KCEP Ventures II, L.P. (and reasonably acceptable to the Board of Directors) to
be elected to the Board of Directors, who shall serve in accordance with the
provisions of the Articles of Incorporation and the Bylaws of the Company. KCEP
Ventures II, L.P.'s designated director may choose to serve on, and shall then
be appointed to, the Audit Committee of the Board of Directors of the Company.
KCEP Ventures II, L.P.'s designated director shall receive the same fees, and
shall be insured by the same director and officer insurance policy paid for by
the Company, as current members of the Board of Directors of the Company and
shall be allowed to participate in the option program on the same terms and
conditions as other members of the Board of Directors of the Company.
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SECTION 4
MISCELLANEOUS
4.1 GOVERNING LAW. This Agreement is delivered and shall be construed in
accordance with the laws of the State of Kansas, without regard to the conflicts
of laws provisions thereof.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
4.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and
supersedes all prior agreements between the parties with respect to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and the Stockholders owning at least a majority of the
Registrable Securities (on an as-converted basis) not resold to the public, and
any such amendment, waiver, discharge or termination shall be binding on all the
Stockholders.
4.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier or sent via facsimile addressed (a) if to Investor, at 233
West 47th Street, Kansas City, Missouri 64112, facsimile number (816) 960-1777,
Attention: David J. Schulte, or at such other address as the Investor or
permitted assignee shall have furnished to the Company in writing with a copy
to: Stinson, Mag & Fizzell, P.C., 1201 Walnut, Kansas City, Missouri, Attention:
Lynn Snelgrove, Esq., or (b) if to the Company, at 11300 West 89th Street,
Overland Park, Kansas, 66214, facsimile number (913) 492-0861, Attention: Keith
Cowan, or at such other address as the Company shall have furnished to the
Investor in writing with a copy to Blackwell Sanders Peper Martin LLP, 2300 Main
Street, Suite 1000, Kansas City, Missouri 64108, Attention: Steven F. Carman,
Esq. All such notices and other written communications shall be effective (i) if
mailed, five (5) days after mailing, (ii) if delivered, upon delivery and (iii)
if sent via facsimile, upon confirmation of receipt.
4.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power
or remedy accruing to the Investor, upon any breach or default of the Company
under this Agreement shall impair any such right, power or remedy of the
Investor nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default therefore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of the
Investor of any breach or default under this Agreement or any waiver on the part
of the Investor of any provisions or conditions of this Agreement must be made
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to the Investor, shall be cumulative and not alternative.
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4.6 SEPARABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
4.7 INFORMATION CONFIDENTIAL. The Investor acknowledges that the
information received by it pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or the Investor is required to disclose such
information by a governmental body.
4.8 TITLES AND SUBTITLES. The titles of the paragraphs and sub-paragraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Investors Rights
Agreement effective as of the day and year first above written.
AIRPORT SYSTEMS INTERNATIONAL, INC.
By:_________________________________
Keith S. Cowan
President
KCEP VENTURES II, L.P.
By: KCEP II, L.C., its General Partner
By:_________________________________
Name:____________________________
Title:___________________________
EXECUTION COPY
AIRPORT SYSTEMS INTERNATIONAL, INC.
AND
KCEP VENTURES II, L.P.
----------------------
$500,000
10% CONVERTIBLE SUBORDINATED DEBENTURE DUE FEBRUARY 7, 2005
DATED AS OF FEBRUARY 7, 2000
<PAGE>
TABLE OF CONTENTS*
PAGE
ARTICLE I OBLIGATIONS OF THE COMPANY........................................1
ARTICLE II DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..........2
Section 2.1 Definitions................................................2
Section 2.2 Form of Documents Delivered................................5
Section 2.3 Acts of Holder.............................................6
Section 2.4 Notices, etc...............................................6
Section 2.5 Notices to Holder; Waiver..................................6
ARTICLE III THE DEBENTURE...................................................6
Section 3.1 Title and Terms............................................6
Section 3.2 Persons Deemed Owners......................................7
Section 3.3 Withholdings...............................................7
ARTICLE IV REDEMPTION OF DEBENTURE..........................................7
Section 4.1 Right of Redemption........................................7
Section 4.2 Applicability of Article...................................8
Section 4.3 Notice of Redemption.......................................8
Section 4.4 Debenture Payable on Redemption Date.......................8
ARTICLE V COVENANTS.........................................................9
Section 5.1 Payment of Principal and Interest..........................9
Section 5.2 Statement as to Compliance.................................9
Section 5.3 Corporate Existence........................................9
Section 5.4 Payment of Taxes and Other Claims..........................9
Section 5.5 Maintenance of Properties.................................10
Section 5.6 Dividend, Repurchase and Redemption Restrictions..........10
Section 5.7 Waiver of Covenants.......................................11
Section 5.8 Accountants' Certificate..................................11
Section 5.9 Usury Laws................................................11
ARTICLE VI REMEDIES........................................................11
Section 6.1 Events of Default.........................................11
Section 6.2 Acceleration of Maturity; Rescission; Annulment and
Standstill................................................12
Section 6.3 Collection of Indebtedness................................13
Section 6.4 Unconditional Right of the Holder to Receive
Principal and Interest and to Convert.....................14
Section 6.5 Restoration of Rights and Remedies........................14
Section 6.6 Rights and Remedies Cumulative............................14
Section 6.7 Delay or Omission Not Waiver..............................14
- -------------------
* Table of Contents is not part of this Debenture
<PAGE>
ARTICLE VII MERGER, TRANSFER...............................................15
Section 7.1 Company May Merge, etc., Only on Certain Terms............15
ARTICLE VIII SUBORDINATION OF DEBENTURE....................................15
Section 8.1 Agreement of Subordination................................15
Section 8.2 Payments to the Holder....................................16
Section 8.3 Intentionally Omitted.....................................17
Section 8.4 Holder's Relation to Superior Indebtedness................17
Section 8.5 No Impairment of Subordination............................17
ARTICLE IX CONVERSION OF DEBENTURE.........................................18
Section 9.1 Conversion Privilege......................................18
Section 9.2 Exercise of Conversion Privilege..........................18
Section 9.3 No Conversion Adjustments.................................19
Section 9.4 Adjustment of Conversion Price............................19
Section 9.5 Fractions of Shares.......................................20
Section 9.6 Effect of Mergers, etc., on Conversion Privilege..........21
Section 9.7 Notice of Adjustments.....................................21
Section 9.8 Notice of Certain Events..................................21
Section 9.9 Company to Reserve Common Stock; Listing..................22
Section 9.10 Taxes on Conversions.....................................23
ARTICLE X MISCELLANEOUS....................................................23
Section 10.1 Amendment................................................23
Section 10.2 Successors and Assigns...................................23
Section 10.3 Severability ............................................23
Section 10.4 Captions.................................................23
Section 10.5 Complete Agreement.......................................23
Section 10.6 Choice of Law............................................24
Section 10.7 Expenses.................................................24
Section 10.8 Counterpart Execution....................................24
Section 10.9 Legal Holidays...........................................24
EXHIBIT A
EXHIBIT B
<PAGE>
NEITHER THIS DEBENTURE, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON THE
CONVERSION HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER, SALE OR OTHER
DISPOSITION OF THIS DEBENTURE MAY BE MADE UNLESS A REGISTRATION STATEMENT WITH
RESPECT TO THIS DEBENTURE HAS BECOME EFFECTIVE UNDER SAID ACT, AND SUCH
REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS OF
ANY STATE HAS BECOME EFFECTIVE, OR AIRPORT SYSTEMS INTERNATIONAL, INC. HAS BEEN
FURNISHED WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AIRPORT SYSTEMS
INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED WITH RESPECT TO SUCH
PROPOSED DISPOSITION THEREOF, AND THAT SUCH DISPOSITION WILL NOT CAUSE THE LOSS
OF THE EXEMPTION UPON WHICH AIRPORT SYSTEMS INTERNATIONAL, INC. RELIED IN
ISSUING THIS DEBENTURE TO THE ORIGINAL OWNER THEREOF.
AIRPORT SYSTEMS INTERNATIONAL, INC.
10% CONVERTIBLE SUBORDINATED
DEBENTURE DUE FEBRUARY 7, 2005
THIS 10% CONVERTIBLE SUBORDINATED DEBENTURE (this "Debenture") is made as
of the 7th day of February, 2000, by and between AIRPORT SYSTEMS INTERNATIONAL,
INC., a Kansas corporation (hereinafter called the "Company"), having its
principal office at 11300 West 89th Street, Overland Park, Kansas 66214 and KCEP
VENTURES II, L.P., (hereinafter called the "Holder") having its principal office
at 233 West 47th Street, Kansas City, Missouri 64112.
WHEREAS, pursuant to the Investment Agreement, the Holder has agreed to
purchase this Debenture from the Company and the Company has agreed to issue
this Debenture to the Holder;
NOW, THEREFORE, for and in consideration of the premises and the purchase
of this Debenture by the Holder hereof, it is mutually covenanted and agreed as
follows:
ARTICLE I
OBLIGATIONS OF THE COMPANY
The Company, for value received, hereby promises to pay to KCEP VENTURES
II, L.P., or registered assigns, the principal sum of Five Hundred Thousand
Dollars ($500,000), on February 7, 2005, and to pay interest, at the times and
in the amounts determined in accordance with SECTION 3.1. The principal of and
interest on this Debenture are payable as set forth in SECTION 3.1. Any interest
not punctually paid or duly provided for shall be payable as provided in this
Debenture.
<PAGE>
ARTICLE II
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 2.1.DEFINITIONS
For all purposes of this Debenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) all references in this Debenture to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Debenture. The words "herein," "hereof,"
and "hereunder" and other words of similar import refer to this Debenture
as a whole and not to any particular Article, Section or other
subdivision;
(2) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular; and
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles applicable to companies located within the United States
("GAAP").
"ACT" when used with respect to the Holder has the meaning specified in
SECTION 2.3.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"BOARD OF DIRECTORS" means either the Board of Directors of the Company or
any duly authorized committee of that Board.
"BUSINESS DAY" means each day which is neither a Saturday, Sunday nor
other day on which banking institutions in the pertinent Place of Payment are
authorized or obligated by law or executive order to remain closed.
"CLOSING PRICE" means for any Trading Day (a) if the Common Stock is
listed or admitted to trading on a national securities exchange, the closing
price on the AMEX-Composite Tape (or any successor composite tape reporting
transactions on national securities exchanges) or, if such a composite tape
shall not be in use or shall not report transactions in the Common Stock, the
last reported sales price on the principal national securities exchange on which
the Common Stock is listed or admitted to trading (which shall be the national
securities exchange on which the greatest number of shares of the Common Stock
has been traded during the preceding 30 consecutive Trading Days), (b) if the
Common Stock is not listed or admitted to trading on any such exchange, the
closing price for the Common Stock on the Nasdaq National Market, as reported by
Nasdaq, (c) if such prices are not so quoted in the Nasdaq National Market, the
<PAGE>
closing bid price of the Common Stock in the over-the-counter market as reported
by the National Association of Securities Dealers Automated Quotations System,
or (d) if such prices are not so quoted in the over-the-counter market, the
average of the highest bid and lowest asked prices as reported by the National
Quotations Bureau, Incorporated or a similar organization selected from time to
time by the Company for that purpose.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company authorized at the date of this Debenture and stock of any other class
issued by the Company or any successor to the Company into which such presently
authorized Common Stock, par value $.01 per share, may be converted.
"COMPANY" means the Person named as the "Company" in the first paragraph
of this Debenture until a successor corporation shall have become such pursuant
to the applicable provisions of this Debenture, and thereafter "Company" shall
mean such successor corporation.
"COMPANY REQUEST" and "COMPANY ORDER" mean, respectively, a written
request or order signed in the name of the Company by its duly authorized
officer.
"CONSOLIDATED NET INCOME" means the aggregate net income or loss of the
Company and its Subsidiaries, as consolidated and determined in accordance with
GAAP.
The terms "FUNDS," "MONEY," "AMOUNT" and similar words referring to the
payment of money pursuant to the terms of this Debenture mean immediately
available funds.
"EVENT OF DEFAULT" has the meaning specified in ARTICLE VI.
"GAAP" has the meaning specified in SECTION 2.1(3).
"HOLDER" means the Person named as the "Holder" in the first paragraph of
this Debenture.
"INDEPENDENT" when used with respect to any specified Person means such a
Person who (1) is in fact independent, (2) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor upon this Debenture or in any Affiliate of the Company or of such
other obligor, and (3) is not connected with the Company or such other obligor
or any Affiliate of the Company or of such other obligor, as an officer,
employee, promoter, partner, director or Person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished, such Person shall be appointed by a Company
Order, and such opinion or certificate shall state that the signer has read this
definition and that the signer is Independent within the meaning hereof.
"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on this Debenture.
"INVESTMENT AGREEMENT" means that certain Investment Agreement, dated as
of February 7, 2000, between the Company and the Holder.
<PAGE>
"MATURITY" when used with respect to this Debenture means the date on
which the principal of this Debenture becomes due and payable as herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the
Board or the President, and by the Treasurer, the Controller, the Secretary or
an Assistant Secretary of the Company.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be legal
counsel for the Company, or such other legal counsel as may be reasonably
acceptable to the Holder.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"REDEMPTION DATE" when used with respect to this Debenture means the date
fixed for redemption.
"REDEMPTION PRICE" when used with respect to this Debenture means the
price at which it is to be redeemed.
"STATED MATURITY" when used with respect to this Debenture or any
installment of interest hereon means the date specified in this Debenture as the
fixed date on which the principal of this Debenture or such installment of
interest is due and payable.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement,
dated as of February 7, 2000, between the Holder, the Company, DCI, Inc., a
Kansas corporation, and Bank of America, N.A. attached hereto as EXHIBIT A.
"SUBSIDIARY" means any corporation of which the Company, or the Company
and one or more Subsidiaries, or any one or more Subsidiaries, directly or
indirectly own more than 50% of the outstanding capital stock having under
ordinary circumstances (not dependent upon the happening of a contingency)
voting power in the election of members of the board of directors, managers or
trustees of said corporation.
"SUPERIOR INDEBTEDNESS" means the principal of, and premium, if any, and
accrued and unpaid interest on, together with all charges, fees (including
without limitation attorneys' fees), costs and expenses required to be paid by
the Company under the terms of any (a) indebtedness of the Company for money
borrowed or in respect of letters of credit issued for its own account, whether
outstanding on the date of execution of this Debenture or thereafter created,
incurred or assumed, (b) guarantees by the Company of indebtedness for money
borrowed by or payment or performance obligations due from any other person,
whether outstanding on the date of execution of this Debenture or thereafter
created, incurred or assumed, (c) purchase money indebtedness evidenced by
notes, lease-purchase agreements, purchase contracts or agreements, or similar
instruments for the payment of which the Company is responsible or liable, by
guarantees or otherwise, whether outstanding on the date of execution of this
Debenture or thereafter created, incurred or assumed, (d) obligations of the
Company under any agreement to lease, or lease of, any real or personal property
which are required to be capitalized in
<PAGE>
accordance with generally accepted accounting principles, or any other agreement
to lease, or lease of, any real or personal property which, by the terms
thereof, are expressly designated as Superior Indebtedness, whether outstanding
on the date of execution of this Debenture or thereafter created, incurred or
assumed, (e) performance, completion or similar bonds of the Company, whether
outstanding on the date of execution of this Debenture, or thereafter created,
incurred or assumed, (f) obligations of the Company under any agreement to
license or use software, technical know-how, copyrights, trademarks or patents
or under any joint venture agreements which are outstanding on the date of
execution of this Debenture, or if thereafter created, incurred or assumed,
which by the terms thereof are expressly designated as Superior Indebtedness and
(g) modifications, renewals, extensions and refundings of any such indebtedness,
guarantees, obligations or bonds; unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such indebtedness, guarantees, obligations or bonds, or such modifications,
renewals, extensions or refundings thereof, or the obligations of the Company
pursuant to such a guarantee, are either (i) not superior in right of payment to
this Debenture or (ii) subordinate in right of payment to all other indebtedness
of the Company.
"TRADING DAY" means such day which is neither a Saturday, Sunday nor other
day on which the principal national securities exchange (as determined in
accordance with the definition of Closing Price) on which the Common Stock is
listed or admitted to trading, or if the Common Stock is not so listed or
admitted to trading, the National Association of Securities Dealers Automated
Quotations System, as the case may be, remains closed.
SECTION 2.2 FORM OF DOCUMENTS DELIVERED
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows or has reason to know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments, they may, but need not, be consolidated and form one instrument.
<PAGE>
SECTION 2.3 ACTS OF HOLDER
Any request, demand, authorization, direction, notice, consent, waiver or
other action to be given or taken by the Holder may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by the Holder
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Holder signing such instrument or instruments.
SECTION 2.4 NOTICES, ETC. TO COMPANY
Any request, demand, authorization, direction, notice, consent, waiver or
Act of the Holder or other document provided or permitted to be made upon, given
or furnished to, or filed with the Company by the Holder shall be sufficient for
every purpose hereunder if in writing and mailed, first-class, postage prepaid,
to the Company addressed to it at the address of its principal executive offices
specified in the first paragraph hereof or at any other address previously
furnished in writing by the Company.
SECTION 2.5 NOTICES TO HOLDER; WAIVER
Where this Debenture provides for notice to the Holder of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class, postage prepaid, to the Holder, at the
address specified in the first paragraph hereof or at any other address
previously furnished in writing by the Holder, not later than the latest date,
if any, and not earlier than the earliest date, if any, prescribed for the
giving of such notice. Where this Debenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice.
ARTICLE III
THE DEBENTURE
SECTION 3.1 TITLE AND TERMS
This Debenture shall be known and designated as the "10% Convertible
Subordinated Debenture Due February 7, 2005" of the Company. The Stated Maturity
of this Debenture shall be February 7, 2005, and the principal amount of this
Debenture shall bear interest, as set forth below, at the rate per annum set
forth in the preceding sentence, until the principal hereof is paid in full and
(to the extent that the payment of such interest shall be legally enforceable)
such interest shall accrue on any overdue installment of interest at a rate of
13% per annum.
This Debenture may be sold, transferred, assigned or hypothecated, in
whole or in part by completing a form of assignment that is acceptable to the
Company, only to (a) partners of Kansas City Equity Partners L.C. ("KCEP"), or
KCEP Ventures II, L.P., (b) successors to KCEP or KCEP Ventures II, L.P., in a
merger, consolidation or other reorganization, (c) transferees, or officers of
transferees of KCEP or KCEP Ventures II, L.P., in the event of liquidation or
<PAGE>
dissolution of either such entity, or (d) a purchaser, or officers of a
purchaser, of substantially all of the assets of KCEP or KCEP Ventures II, L.P.,
and shall be so transferable only upon the books of the Company which the
Company shall cause to be maintained for such purpose, provided, however, any
such transfer is in an amount which permits the transferee to convert a minimum
of 10,000 shares of Common Stock, unless otherwise consented to by the Company,
in which event the Company shall issue a new Debenture to each such Person,
which new Debenture shall contain substantially identical rights, limitations,
terms and conditions as this Debenture.
Except as otherwise provided in this ARTICLE III, this Debenture shall
bear interest, payable quarterly on April 30, July 31, October 31 and January 31
of each year, commencing April 30, 2000. Interest on this Debenture shall be
computed on the basis of a 360-day year constituting twelve 30-day months.
Payments due on this Debenture shall be payable by wire transfer to an
account designated by the Holder.
This Debenture shall be subordinated in right of payment to certain other
indebtedness of the Company as provided in ARTICLE VIII or the Subordination
Agreement.
This Debenture shall be convertible into Common Stock of the Company as
provided in ARTICLE IX.
SECTION 3.2 PERSONS DEEMED OWNERS
Prior to the transfer of this Debenture, as permitted by SECTION 3.1, the
Company shall treat the Holder as the owner of this Debenture for the purpose of
receiving payment of principal of, and interest on, this Debenture, for the
purpose of conversion and for all other purposes whatsoever, whether or not this
Debenture is overdue, and the Company shall not be affected by notice to the
contrary.
SECTION 3.3 WITHHOLDINGS
The Company shall be entitled to withhold from all payments of principal
of and interest on this Debenture any amounts required to be withheld under the
applicable provisions of the Federal and state income tax laws of the United
States at the time of such payments. If the Holder shall furnish to the Company
an Opinion of Counsel to the effect that no withholding is required under the
applicable provisions of such income tax laws of the United States, then the
Company shall not withhold any amounts from such payments.
ARTICLE IV
REDEMPTION OF DEBENTURE
SECTION 4.1 RIGHT OF REDEMPTION
(a) This Debenture may not be redeemed prior to February 7, 2002. With
respect to redemption on or after such date, this Debenture may be redeemed, at
the option of the
<PAGE>
Company, as a whole, upon not less than 30 nor more than 45 days' prior notice
to the Holder, by payment of the Redemption Price set forth in SECTION 4.1(B);
provided, however, that the Company's average Closing Price for its Common Stock
for the 30 consecutive Trading Days immediately prior to the date of notice of
redemption shall have equaled or exceeded $9.00 per share. Otherwise, the
Company shall not have any right, entitlement or option to redeem this
Debenture.
(b) In the event this Debenture is called for redemption, unless
surrendered for conversion before the close of business on the fifth Business
Day next preceding the Redemption Date, the Company shall purchase this
Debenture by payment of 100% of the principal amount of this Debenture, together
with accrued and unpaid interest to the Redemption Date.
SECTION 4.2 APPLICABILITY OF ARTICLE
Redemption of this Debenture, at the election of the Company, as permitted
by this Debenture, shall be made in accordance with this Article.
SECTION 4.3 NOTICE OF REDEMPTION
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 45 days, prior to the Redemption Date, to
the Holder at the address set forth in the first paragraph of this Debenture or
at any other address previously furnished in writing by the Holder.
A notice of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become due
and payable upon this Debenture, and that interest thereon shall cease to
accrue on said date,
(4) the place where such Debenture is to be surrendered for payment
of the Redemption Price, which shall be the office or agency of the
Holder, and
(5) the current conversion price of this Debenture, the place or
places where this Debenture may be surrendered for conversion, and shall
specify the time at which the right to convert this Debenture will
terminate.
SECTION 4.4 DEBENTURE PAYABLE ON REDEMPTION DATE
Notice of redemption having been given as aforesaid, this Debenture shall,
on the Redemption Date, become due and payable at the Redemption Price therein
specified and on such date (unless the Company shall default in the payment of
the Redemption Price) this Debenture shall cease to bear interest. Upon
surrender of this Debenture for redemption in accordance with said notice, this
Debenture shall be paid by the Company at the Redemption Price. If the
Redemption Date is on a day other than an Interest Payment Date, interest
accrued
<PAGE>
on this Debenture to be redeemed, from the immediately preceding Interest
Payment Date to the Redemption Date, shall be paid by the Company on the
Redemption Date to the Holder of this Debenture.
If this Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate borne by this Debenture.
ARTICLE V
COVENANTS
SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST
The Company will duly and punctually pay the principal of and interest on
this Debenture in accordance with the terms of this Debenture.
SECTION 5.2 STATEMENT AS TO COMPLIANCE
The Company will deliver to the Holder, within 120 days after the end of
each fiscal year, a written statement signed by the Chairman of the Board or the
President and by the Chief Financial Officer, the Treasurer or the Controller of
the Company, stating, as to each signer thereof, that:
(1) a review of the activities of the Company during such year and
of performance under this Debenture has been made under his supervision,
and
(2) to the best of his knowledge, based on such review, the Company
has fulfilled all its obligations under this Debenture throughout such
year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to the signer and the
nature and status thereof.
SECTION 5.3 CORPORATE EXISTENCE
Subject to ARTICLE VII, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
and its corporate authority and rights (charter and statutory); PROVIDED,
HOWEVER, that the Company shall not be required to preserve any corporate
authority or rights if the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the Holder.
SECTION 5.4 PAYMENT OF TAXES AND OTHER CLAIMS
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon its income, profits or property, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon its property; PROVIDED, HOWEVER, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such
<PAGE>
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 5.5 MAINTENANCE OF PROPERTIES
The Company will cause all its properties used or useful in the conduct of
its business to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the
Company from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business and not disadvantageous in any material respect
to the Holder.
SECTION 5.6 DIVIDEND, REPURCHASE AND REDEMPTION RESTRICTIONS
So long as this Debenture shall be outstanding, the Company will not
declare any dividends (other than dividends payable solely in stock of the
Company or in rights or warrants entitling the holders thereof to subscribe for
or to purchase stock of the Company) on any stock of the Company and will not
make, or permit any Subsidiary to make, any payment on account of the purchase,
redemption or other retirement (other than repurchases of stock upon officer,
director or employee terminations pursuant to written agreements) of any shares
of such stock or make, or permit any Subsidiary to make, any distribution in
respect thereof, except for distributions made by any Subsidiary of the Company
directly to the Company, either directly or indirectly, unless such dividends
are declared to be payable not more than 90 days after the date of declaration
and unless, after giving effect to such proposed dividend or other payment or
distribution and to any other dividends declared but not paid, at the date of
such declaration (in the case of a dividend) or of such other payment or
distribution (hereinafter called the "Computation Date") (1) there exists no
Event of Default (as defined herein) and (2) the sum of the aggregate amount of
all dividends declared and all such other payments and distributions made during
the period commencing February 7, 2000 to and including the Computation Date
shall not exceed an amount equal to the aggregate Consolidated Net Income
computed for the period commencing November 30, 1999, to and including the end
of the last fiscal quarter of the Company next preceding the date 15 days prior
to the Computation Date;
For the purposes of any computation under this SECTION 5.6, the amount of
any dividend declared or other payment or distribution made in property other
than cash shall be deemed to be fair value (as determined by the Board of
Directors) of such property at the time of declaration (in the case of
dividends) or at the time of payment or distribution.
Notwithstanding the foregoing provisions, the Company may purchase,
acquire or issue cash in respect of any fractional shares resulting from any
stock dividend, stock split, stock combination, recapitalization or
reorganization, provided that the aggregate amount so paid shall be included as
a payment in any calculation under the provisions of this SECTION 5.6.
<PAGE>
SECTION 5.7 WAIVER OF COVENANTS
The Company may omit in any particular instance to comply with any
covenant or condition set forth in SECTIONS 5.4, 5.5, or 5.6, if before or after
the time for such compliance the Holder shall either waive such compliance in
such instance or generally waive compliance with such covenant or condition, but
no such waiver shall extend to or affect such covenant or condition except to
the extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company in respect of any such covenant or condition
shall remain in full force and effect.
SECTION 5.8 ACCOUNTANTS' CERTIFICATE
At the time the statement required by SECTION 5.2 is filed, the Company
shall provide the Holder a letter or statement of the Independent public
accountants who shall have certified the financial statements of the Company for
its preceding fiscal year in connection with the annual report of the Company to
its stockholders for such year to the effect that, in making the examination
necessary for certification of such financial statements, they have obtained no
knowledge of any default by the Company in the performance or fulfillment of any
covenant, agreement or condition set forth in SECTIONS 5.4 and 5.6 hereof, which
default remains uncured at the date of such letter or statement, or, if they
shall have obtained knowledge of any such uncured default, specifying in such
letter or statement such default or defaults and the nature thereof, it being
understood that such accountants shall not be liable directly or indirectly for
failure to obtain knowledge of any such default or defaults.
SECTION 5.9 USURY LAWS
The Company agrees:
(1) not to insist upon, or plead, or in any manner whatsoever claim
the benefit or the advantage of the Kansas usury law or the usury law of
any other jurisdiction against the Holder in connection with any claim,
action or proceeding which may be brought by the Holder in order to
enforce any right or remedy hereunder; and
(2) to resist any and all efforts to compel the Company to claim the
benefit or the advantage of the Kansas usury law or the usury law of any
other jurisdiction against the Holder in connection with any claim, action
or proceeding which may be brought by the Holder in order to enforce any
right or remedy under this Debenture.
ARTICLE VI
REMEDIES
SECTION 6.1 EVENTS OF DEFAULT
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of ARTICLE VIII hereof or be voluntary or
involuntary or be effected by operation of
<PAGE>
law pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest upon this Debenture when
the same becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of this Debenture at its
Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Debenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 30 days after there has been given, by registered
or certified mail, to the Company by the Holder, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "NOTICE OF DEFAULT" hereunder; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company under the Superior Indebtedness, and the
continuance of such Default or breach for a period of 60 days after there
has been given, to the Company by the agent or trustee of the Superior
Indebtedness, a written notice specifying such default or breach and
requiring it to be remedied and stating such notice is a "NOTICE OF
DEFAULT" under the Superior Indebtedness; or
(5) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or
for any substantial part of its property, or ordering the winding-up or
liquidation of its affairs and such decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or
(6) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of
the foregoing.
SECTION 6.2 ACCELERATION OF MATURITY; RESCISSION; ANNULMENT AND STANDSTILL
If an Event of Default occurs and is continuing, then the Holder may,
subject to the other provisions of this Debenture and the Subordination
Agreement, declare the principal of this Debenture to be immediately due and
payable, by a notice in writing to the Company, and upon any such declaration
such principal shall become immediately due and payable.
<PAGE>
At any time after such a declaration of acceleration has been made, the
Holder, by written notice to the Company, shall rescind and annul such
declaration and its consequences if:
(1) the Company has paid or deposited a sum sufficient to pay:
(A) All overdue installments of interest on this Debenture,
(B) the principal of this Debenture which has become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by this Debenture,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at a rate of 13% per
annum, and
(D) the reasonable compensation, expenses, disbursements and
advances of agents and counsel; and
(2) all Events of Default, other than the non-payment of the
principal of this Debenture which has become due solely by such
acceleration, have been cured or waived by the Holder.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Subject to the other provisions of this Debenture and the Subordination
Agreement, the Holder may not elect to accelerate the maturity of this Debenture
until it has first notified the agent or trustee of Superior Indebtedness in
writing (and provided a copy in writing of such notice to the Company) and shall
not take any of the following actions for a period ending on the earlier of (i)
180 days after the receipt of such notice by the holders of Superior
Indebtedness and the Company or (ii) payment in full of the Superior
Indebtedness:
(A) commencement or continuation of any action or proceeding
against the Company, whether to reduce the claims of the Holder to
judgment or to enforce the terms of this Debenture or otherwise;
(B) any act to obtain possession of property of the Company or
to exercise control over property of the Company; or
(C) any act to create, perfect or enforce any lien against
property of the Company.
SECTION 6.3 COLLECTION OF INDEBTEDNESS
The Company covenants that if:
(1) default is made in the payment of any installment of interest on
this Debenture when such interest becomes due and payable and such default
continues for a period of 30 days, or
<PAGE>
(2) default is made in the payment of the principal of this
Debenture at the Maturity thereof,
the Company will, upon demand of the Holder, pay to it, the whole amount then
due and payable on this Debenture for principal and interest, with interest upon
the overdue principal and, to the extent that payment of such interest shall be
legally enforceable, upon overdue installments of interest, at a rate of 13% per
annum; and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Holder, its agents and
counsel.
SECTION 6.4 UNCONDITIONAL RIGHT OF THE HOLDER TO RECEIVE PRINCIPAL AND
INTEREST AND TO CONVERT
Subject to the provisions of ARTICLE VIII hereof and the Subordination
Agreement, the Holder shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest on this Debenture on the
Stated Maturity (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment and the right to convert
this Debenture in accordance with ARTICLE IX and to institute suit for its
enforcement, and such rights shall not be impaired without the consent of the
Holder.
SECTION 6.5 RESTORATION OF RIGHTS AND REMEDIES
If the Holder has instituted any proceeding to enforce any right or remedy
under this Debenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Holder, then and in every
such case, the Company and the Holder shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Holder shall
continue as though no such proceeding (except for the situation in which there
was a determination adverse to the Holder) had been instituted.
SECTION 6.6 RIGHTS AND REMEDIES CUMULATIVE
No right or remedy herein conferred upon or reserved to the Holder is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.7 DELAY OR OMISSION NOT WAIVER
No delay or omission of the Holder of this Debenture to exercise any right
or remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Holder
may be exercised from time to time, and as often as may be deemed expedient.
<PAGE>
ARTICLE VII
MERGER, TRANSFER
SECTION 7.1 COMPANY MAY MERGE, ETC., ONLY ON CERTAIN TERMS
The Company shall not (a) effect a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended, or (b) merge into
any other person, firm or entity or (c) transfer all or substantially all of its
property or assets to any other person, firm or entity under any plan or
arrangement contemplating the exchange of the Company's stock or assets for
stock and/or other property (including cash) with, in the circumstance described
in this SECTION 7.1(C), the view to distributing such stock and/or other
property (including cash) to the Company's stockholders upon the dissolution of
the Company within 24 months after the date of such transfer, unless
(1) the corporation which results from such reorganization, or into
which the Company is merged or the Person which acquires by transfer the
properties and assets of the Company substantially as an entirety shall be
a corporation organized and existing under the laws of the United States
of America or any State or the District of Columbia, and shall expressly
assume the due and punctual payment of the principal of and interest on
this Debenture and the performance of every covenant of this Debenture on
the part of the Company to be performed or observed and all applicable
provisions of ARTICLE IX shall be complied with by such corporation or
Person, as the case may be;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Holder an Officers' Certificate
stating that such reorganization, merger, or transfer comply with this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with and an opinion of counsel to be
delivered to the Holder covering appropriate related topics.
ARTICLE VIII
SUBORDINATION OF DEBENTURE
SECTION 8.1 AGREEMENT OF SUBORDINATION
The Company covenants and agrees, and the Holder of this Debenture by
acceptance hereof likewise covenants and agrees, that this Debenture shall be
issued subject to the provisions of this ARTICLE VIII; and the Holder accepts
and agrees to be bound by such provisions.
<PAGE>
SECTION 8.2 PAYMENTS TO THE HOLDER
No payment on account of principal of or interest on this Debenture shall
be made if any default or event of default with respect to any Superior
Indebtedness which permits the holders thereof (or any agent acting on their
behalf) to accelerate the maturity thereof shall have occurred and be
continuing.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Superior Indebtedness (including principal, premium, if any,
and interest due thereon) shall first be paid in full, or payment thereof
provided for, in money or money's worth, in accordance with its terms, before
any payment is made on account of the principal or interest on this Debenture;
and upon any such dissolution or winding-up or liquidation or reorganization or
any payment by the Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the Holder would
be entitled, except for the provisions of this ARTICLE VIII, any such payment or
distribution of assets shall be paid, or delivered, as the case may be, by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution directly to the holders of
Superior Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Superior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Superior Indebtedness
in full, in money or money's worth, after giving effect to any concurrent
payment or distribution to or for the holders of Superior Indebtedness, before
any payment or distribution is made to the Holder.
In the event that, notwithstanding the preceding paragraphs, any payment
by, or distribution of assets of, the Company of any kind or character, whether
in cash, property or securities, shall be received by the Holder before all
Superior Indebtedness is paid in full, such payment or distribution shall be
paid over or delivered to the holders of Superior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Superior Indebtedness
may have been issued, as their respective interests may appear, for application
to the payment of all Superior Indebtedness remaining unpaid to the extent
necessary to pay all Superior Indebtedness in full in money or money's worth in
accordance with its terms, after giving effect to any noncurrent payment or
distribution to or for the holders of such Superior Indebtedness.
Upon any payment or distribution of assets of the Company referred to in
this ARTICLE VIII, the Holder shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which any dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, delivered to the Holder,
for the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of the Superior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this ARTICLE VIII.
<PAGE>
For purposes of this ARTICLE VIII, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized, or securities of the Company or any other corporation provided for
by a plan of reorganization, the payment of which is subordinated at least to
the extent provided in this ARTICLE VIII with respect to this Debenture to the
payment of all Superior Indebtedness which may at the time be outstanding;
PROVIDED that (i) Superior Indebtedness is assumed by the new reorganization,
and (ii) the rights of the holders of the Superior Indebtedness are not, without
the consent of such holders, altered by such reorganization. The consolidation
of the Company with, or into another corporation or the liquidation or
dissolution of the Company following the conveyance, lease or transfer of its
property as an entirety, or substantially as an entirety, to another corporation
upon the terms and conditions provided in ARTICLE VII hereof shall not be deemed
a dissolution, winding-up, liquidation or reorganization for the purposes of
this SECTION 8.2 if such other corporation or Person shall, as a part of such
consolidation, merger, conveyance, lease or transfer, comply with the conditions
stated in ARTICLE VII hereof.
Nothing contained in this ARTICLE VIII or elsewhere in this Debenture is
intended to or shall impair, as between the Company, its creditors other than
the holders of Superior Indebtedness, and the Holder, the obligation of the
Company, which is absolute and unconditional, to pay to the Holder the principal
of and interest on this Debenture as and when the same shall become due and
payable in accordance with its terms, or is intended to or shall affect the
relative rights of the Holder and creditors of the Company other than the
holders of the Superior Indebtedness, nor shall anything herein prevent the
Holder from exercising all remedies otherwise permitted by applicable law upon
default, subject to the rights, if any, under this ARTICLE VIII of the holders
of Superior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
If the Company fails because of this ARTICLE VIII to pay principal of or
interest on this Debenture on the due date, the failure is still an Event of
Default.
SECTION 8.3 INTENTIONALLY OMITTED
SECTION 8.4 HOLDER'S RELATION TO SUPERIOR INDEBTEDNESS
The Holder shall be entitled to all the rights set forth in this ARTICLE
VIII in respect of any Superior Indebtedness at any time held by it, to the same
extent as any other holder of Superior Indebtedness, and nothing herein shall
deprive the Holder of any of its rights.
With respect to the holders of Superior Indebtedness, the Holder
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this ARTICLE VIII, and no implied covenants or
obligations with respect to the holders of Superior Indebtedness shall be read
into this Debenture against the Holder. The Holder shall not be deemed to owe
any fiduciary duty to the holders of Superior Indebtedness.
SECTION 8.5 NO IMPAIRMENT OF SUBORDINATION
No right of any present or future holder of any prior Superior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by
<PAGE>
any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Debenture, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with.
ARTICLE IX
CONVERSION OF DEBENTURE
SECTION 9.1 CONVERSION PRIVILEGE
The Holder shall have the right at its option, at any time during usual
business hours on or before the close of business on or prior to February 7,
2005 (except that, with respect to this Debenture which shall be called for
redemption, such right shall terminate at the close of business on the fifth
Business Day next preceding the Redemption Date of this Debenture, unless the
Company shall default in payment due upon redemption thereof) to convert,
subject to and in compliance with the terms and provisions of this ARTICLE IX,
the principal of this Debenture or any portion of the principal amount thereof
into shares of Common Stock of the Company at a conversion price equal to $3.00
aggregate principal amount of this Debenture for each share of Common Stock or,
in case an adjustment of such price has taken place pursuant to the provisions
of this ARTICLE IX, then at the price as last adjusted (referred to herein as
the "conversion price"), upon surrender of this Debenture to the Company at its
office in Overland Park, Kansas with the form of conversion notice included
herewith as EXHIBIT B executed by the Holder (hereinafter referred to as the
"conversion notice") evidencing the Holder's intention to convert this Debenture
or a specified portion (as above provided) hereof, specifying the name in which
the shares of Common Stock deliverable upon such conversion shall be registered,
with the address of the Person (and taxpayer identification numbers, if
applicable) so named, and, if so required by the Company accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company duly executed by the Holder or his attorney duly authorized in writing.
For convenience, the conversion of the principal of this Debenture into Common
Stock is herein sometimes referred to as the "conversion" of this Debenture.
Notwithstanding anything to the contrary, the Holder shall not be entitled to
make a partial conversion of this Debenture unless such partial conversion
results in the issuance of no less than 10,000 shares of Common Stock of the
Company by the Holder.
SECTION 9.2 EXERCISE OF CONVERSION PRIVILEGE
As promptly as practicable after the surrender, as herein provided, of
this Debenture for conversion and the receipt of the conversion notice, as
herein provided, relating thereto, and, if applicable, the payment of the funds
provided for in SECTION 9.10 hereof, the Company shall deliver or cause to be
delivered at said office or agency, to or upon the written order of the Holder
of this Debenture so surrendered, a certificate representing the number of
fully-paid and non-assessable shares of Common Stock into which this Debenture
may be converted in accordance with the provisions of this ARTICLE IX,
registered in such name as is specified in the conversion notice, together with
any cash payable in respect of a fractional share. In case the Debenture shall
be surrendered for partial conversion, the Company shall execute and deliver to
or upon the written order of the Holder, without charge to the Holder (subject
to the provisions of SECTION 9.10 hereof), a new Debenture in an aggregate
principal amount equal to the unconverted
<PAGE>
portion of the surrendered Debenture. Subject to the following provisions of
this paragraph, such conversion shall be deemed to have been effected at the
close of business on the date when this Debenture shall have been surrendered
for conversion together with the conversion notice and any funds required by
SECTION 9.10 hereof (whichever shall last occur; the date of the last of such
events to occur is sometimes referred to hereinafter as the "Conversion Date"),
so that the rights of the Holder as such Holder shall cease at such time and the
Person entitled to receive the shares of Common Stock upon conversion of this
Debenture shall be treated for all purposes as having become the record holder
of such shares of Common Stock at such time and such conversion shall be at the
conversion price in effect at such time; PROVIDED, HOWEVER, that no such
surrender on any date when the stock transfer books of the Company shall be
closed shall be effective to constitute the Person entitled to receive the
shares of Common Stock upon such conversion as the record holder of such shares
of Common Stock of such date, but such surrender shall be effective to
constitute the Person entitled to receive such shares of Common Stock as the
record holder thereof for all purposes at the opening of business on the next
succeeding Business Day on which such stock transfer books are open.
If the last day for the exercise of the conversion right at the place of
surrender shall not be a Business Day, then the last day for the exercise of
such right at such place shall be the next succeeding Business Day.
SECTION 9.3 NO CONVERSION ADJUSTMENTS
No payment or adjustment shall be made upon any conversion in respect of
any dividends on the Common Stock delivered upon conversion which were declared
for payment to holders of Common Stock of record as of a date prior to the
Conversion Date.
SECTION 9.4 ADJUSTMENT OF CONVERSION PRICE
The conversion price shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock any shares of the
Company, the conversion price in effect immediately prior thereto shall be
adjusted so that the holder of this Debenture thereafter surrendered for
conversion shall be entitled to receive the number of shares of the Company
which he would have owned or have been entitled to receive after the happening
of any of the events described above, had this Debenture been converted
immediately prior to the happening of such event. An adjustment made pursuant to
this subsection (a) shall become effective immediately after the record date in
the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(b) In case the Company shall issue Additional Shares of Common Stock at a
price per share of Common Stock less than the current conversion price in effect
on the date of and immediately prior to such issue, then, and in such event, the
price per share at which this Debenture may thereafter be converted into Common
Stock shall be determined by dividing the price per share for which this
Debenture was theretofore convertible into Common Stock by a
<PAGE>
fraction of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such Additional Shares of Common Stock
plus the number of Additional Shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such Additional Shares of Common
Stock plus the number of shares which the aggregate offering consideration of
the total number of Additional Shares of Common Stock so offered would purchase
at such current conversion price. Such adjustments shall be made whenever such
Additional Shares of Common Stock are issued. For the purpose of this subsection
(b), the term "Additional Shares of Common Stock" shall mean all shares of
Common Stock, plus rights, options or warrants to subscribe for, purchase or
otherwise acquire shares of Common Stock, or securities convertible or
exchangeable into shares of Common Stock; provided, however, that such term
shall not mean stock awards, rights, options or warrants granted to directors,
management or employees of the Company pursuant to any director, management or
employee plans approved by the Board of Directors of the Company.
(c) In case the Company shall distribute to all holders of its Common
Stock evidences of its indebtedness or assets (excluding cash dividends or other
cash distributions to the extent permitted by SECTION 5.6 hereof) or rights or
warrants to subscribe (excluding those referred to in subsection (b) above other
than pursuant to a shareholder's rights plan) for shares of Common Stock, then
in each such case the price per share at which this Debenture may thereafter be
converted into Common Stock shall be determined by dividing the price per share
for which this Debenture was theretofore convertible into Common Stock by a
fraction, of which the numerator shall be the current market price per share of
Common Stock (as defined in subsection (d) below) on the date of such
distribution and of which the denominator shall be such current market price per
share of the Common Stock, less the then fair market value (as determined by the
Board of Directors of the Company, whose determination shall be conclusive, and
described in a statement provided to the Holder of this Debenture) of the
portion of the assets or evidences of indebtedness so distributed or of such
subscription rights or warrants applicable to one share of the Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective retroactively immediately after the record date for the
determination of stockholders entitled to receive such distribution.
(d) For the purpose of any computation under subsection (c) above, the
current market price per share of Common Stock at any date shall be deemed to be
the average of the daily Closing Prices for the 30 consecutive Trading Days
commencing 45 Trading Days before the day in question.
(e) For the purposes of this ARTICLE IX, any change solely in the par
value of the Common Stock or from par value to no par value or from no par value
to par value of such stock, shall not be deemed to be a reclassification or
recapitalization.
SECTION 9.5 FRACTIONS OF SHARES
No fractional shares or script representing fractional shares shall be
issued upon the conversion of this Debenture. If any fractional interest in a
share of Common Stock would, except for the provisions of this SECTION 9.5, be
deliverable upon the conversion of this Debenture, the Company shall, in lieu of
delivering a fractional share therefor, adjust such
<PAGE>
fractional interest by paying the Holder an amount in cash equal (computed to
the nearest cent) to the Closing Price of such fractional interest on the
Trading Day next preceding the date of conversion.
SECTION 9.6 EFFECT OF MERGERS, ETC., ON CONVERSION PRIVILEGE
In case of any capital reorganization, or of any reclassification of the
Common Stock (other than a reclassification covered by SECTION 9.4(a)(iv)), of
the Company or in case of the merger of the Company into any other corporation,
or of any transfer of the type described in SECTION 7.1(C) of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation, there shall be no adjustment of the conversion price pursuant to
SECTION 9.4 hereof, but this Debenture shall, after such capital reorganization,
reclassification of Common Stock, merger or transfer, be convertible into the
kind and amount of shares of stock or other securities or property (including
cash) to which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such capital reorganization, reclassification
of Common Stock, merger or transfer) upon conversion of this Debenture would
have been entitled upon such capital reorganization, reclassification of Common
Stock, merger, or transfer; and in any case, if necessary, appropriate
adjustment shall be made in the application of the provisions set forth in this
ARTICLE IX with respect to the rights and interests thereafter of the Holder of
this Debenture, to the end that the provisions set forth in this ARTICLE IX
shall thereafter correspondingly be made applicable, as nearly as may reasonably
be, in relation to any shares of stock or other securities or property
(including cash) thereafter deliverable on the conversion of this Debenture. Any
such adjustment shall be confirmed as being accurately determined in accordance
with this SECTION 9.6 by a certificate of a firm of Independent public
accountants; and any adjustment so approved shall for all purposes hereof
conclusively be deemed to be an appropriate adjustment.
The above provisions of this SECTION 9.6 shall similarly apply to
successive reorganizations, reclassifications, mergers, or transfers.
SECTION 9.7 NOTICE OF ADJUSTMENTS
Whenever the conversion price is adjusted as herein provided, the Company
shall promptly provide the Holder a certificate of a firm of Independent public
accountants with respect thereto setting forth the conversion price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the effective date thereof.
The Company shall also forthwith cause to be mailed to the Holder a notice
stating that the conversion price has been adjusted and setting forth the
adjusted conversion price.
SECTION 9.8 NOTICE OF CERTAIN EVENTS
In case:
(1) the Company shall declare a dividend payable, or shall make any
other distribution of its Common Stock (excluding cash dividends or other
cash distributions to the extent permitted by SECTION 5.6 hereof); or
<PAGE>
(2) the Company shall authorize the granting to all the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants; or
(3) of any capital reorganization or reclassification of the Common
Stock of the Company (other than a subdivision or combination or change in
the par value of its outstanding Common Stock), or of any merger to which
the Company is a party and for which approval of any stockholders of the
Company is required, or of any transfer described in SECTION 7.1(C) of all
or substantially all of the assets of the Company, in the event any such
merger or transfer will result in a change in the shares held by the
holders of Common Stock; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then the Company shall cause to be mailed to the Holder, as promptly as
practicable but in any event at least 10 days prior to the applicable record
date, entitlement date or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution or granting of rights (the "record date"), or, if a record is not
to be taken, the date or anticipated date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or granting of
rights are to be determined (the "entitlement date"), or (y) the date or
anticipated date on which such capital reorganization, reclassification, merger,
transfer, dissolution, liquidation or winding-up is expected to become effective
(the "effective date"), and which notice, in the case of the notice specified in
clause (y), shall also state the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such capital
reorganization, reclassification, merger, transfer, dissolution, liquidation or
winding-up.
SECTION 9.9 COMPANY TO RESERVE COMMON STOCK; LISTING
The Company covenants that it will at all times reserve and keep
available, free from pre-emptive rights, out of the aggregate of its authorized
but unissued Common Stock or its issued Common Stock held in its treasury, or
both, for the purpose of effecting conversions of this Debenture, the full
number of shares of Common Stock then deliverable upon the conversion of this
Debenture; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of this Debenture,
the Company will take such corporate action as may in the opinion of its counsel
be necessary to increase its authorized but unissued Common Stock to such number
of shares as shall be sufficient for that purpose.
Before taking any action which would cause an adjustment reducing the
conversion price below the then par value (if any) of the shares of Common Stock
issuable upon conversion of this Debenture, the Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted conversion price.
The Company covenants that if any shares of Common Stock reserved for
conversion of this Debenture require listing upon any national securities
exchange before such shares may be
<PAGE>
delivered upon conversion, the Company will in good faith, and as expeditiously
as possible, endeavor to cause such shares to be duly listed.
SECTION 9.10 TAXES ON CONVERSIONS
The Company will pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on conversion of this Debenture pursuant hereto; PROVIDED, HOWEVER, that
the Company shall not be required to pay any tax which may be payable in respect
of any registration of transfer involved in the issue or delivery of Common
Stock in a name other than that of the Holder of this Debenture to be converted,
and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Company the amount of any such tax or has
established, to the satisfaction of the Company, that such tax has been paid.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 AMENDMENT
This Debenture may only be amended pursuant to a writing signed by the
Company and the Holder.
SECTION 10.2 SUCCESSORS AND ASSIGNS
This Debenture shall be binding upon and inure to the benefit of the
Company and its successors and assigns and the Holder, its successors and
permitted assigns, as the case may be.
SECTION 10.3 SEVERABILITY
Whenever possible, each provision of this Debenture shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Debenture shall be held to 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 the remaining provisions of this Debenture.
SECTION 10.4 CAPTIONS
The captions used in this Debenture and in the Exhibits hereto are for
convenience only and do not constitute a part of this Debenture or such
Exhibits.
SECTION 10.5 COMPLETE AGREEMENT
This Debenture and the Exhibits hereto, along with the Investment
Agreement and the Subordination Agreement, contains the complete agreement
between the parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
<PAGE>
SECTION 10.6 CHOICE OF LAW
All questions concerning the construction, validity and interpretation of
this Debenture and the Exhibits hereto shall be governed by the laws of the
State of Kansas (without regard to the conflict of laws principles thereof).
SECTION 10.7 EXPENSES
Except as set forth in the Investment Agreement, each of the parties
hereto will pay all of its own costs and expenses of negotiation, performance
and enforcement of and compliance with this Debenture, including attorneys'
fees.
SECTION 10.8 COUNTERPART EXECUTION
This Debenture may be executed in any number of counterparts with the same
effect as if all the parties hereto had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
SECTION 10.9 LEGAL HOLIDAYS
In any case where the date of any Interest Payment Date or a Redemption
Date, or the Stated Maturity of this Debenture, or the last date on which the
Holder has the right to convert this Debenture (or the right to convert this
Debenture at a particular conversion price or rate) shall not be a Business Day,
then (notwithstanding any other provision of this Debenture) payment of the
principal of or interest on, or conversion of, this Debenture need not be made
on such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the nominal date of any such Interest Payment
Date or Redemption Date or Stated Maturity, or on such last date for conversion,
and no interest shall accrue for the period from and after such nominal date.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Debenture to be
duly executed as of the day and year above written.
AIRPORT SYSTEMS INTERNATIONAL, INC.
By: _____________________________________
President
Attest:
- ----------------------------------
Secretary
KCEP VENTURES II, L.P.
By: _____________________________________
Partner
<PAGE>
ACKNOWLEDGEMENT
STATE OF ___________ )
) ss:
COUNTY OF ___________ )
On this ______ day of ___________, in the year, 2000, before me, the
undersigned, a notary public of the State of ___________, duly commissioned and
sworn, personally appeared __________________ and ___________________;
personally known to me or proved to me on the basis of satisfactory evidence to
be the persons who executed the within instrument as the President, and
Secretary, respectively, of Airport Systems International, Inc., a Kansas
corporation, and acknowledged to me that such corporation executed the within
instrument pursuant to a resolution of its Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the county and state aforesaid on the day and year in this certificate
first above written.
(SEAL)
_____________________________________
Notary Public
State of ___________
STATE OF ___________ )
) ss:
COUNTY OF ___________ )
On this _____ day of ____________, in the year 2000, before me, the
undersigned, a notary public of the State of ___________, duly commissioned and
sworn, personally appeared ___________________, personally known to me or proved
to me on the basis of satisfactory evidence to be the person who executed the
within instrument as ___________________ of KCEP VENTURES II, L.P., and
acknowledged to me that such partnership executed the within instrument pursuant
to a resolution of its _________________.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the county and state aforesaid on the day and year in this certificate
first above written.
(SEAL)
_____________________________________
Notary Public
State of ___________
<PAGE>
EXHIBIT A
SUBORDINATION AGREEMENT
<PAGE>
EXHIBIT B
CONVERSION NOTICE
To: AIRPORT SYSTEMS INTERNATIONAL, INC.
The undersigned registered holder of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or a portion thereof, into
shares of Common Stock of Airport Systems International, Inc. in accordance with
the terms of this Debenture and directs that the shares issuable and deliverable
upon the conversion, together with any check in payment for fractional shares be
issued and delivered to the registered holder hereof unless a different name has
been indicated below. Unless otherwise directed, a new Debenture representing
any unconverted principal amount hereof shall be delivered to the registered
holder hereof. If shares are to be issued in the name of a person other than the
undersigned, this Debenture must be duly endorsed by or accompanied by
instruments of transfer in form satisfactory to Airport Systems International,
Inc. duly executed by the undersigned and the undersigned will pay all transfer
taxes payable with respect thereto.
Dated:
If different from that of the Holder, print name,
address (including zip code)and Social Security
or other taxpayer identification number of _____________________________
person in whose name the Common Stock will Signature of Holder
be issued.
Signature Guaranteed
_____________________________
_________________________________
Name
SOCIAL SECURITY Principal amount
OR OTHER TAXPAYER to be converted
IDENTIFYING NUMBER (if less than all)
- ------------------------------------------------------------
Address
$___________________
- ------------------------------------------------------------
Please print name and address
(including zip code number)
EXECUTION COPY
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
AIRPORT SYSTEMS INTERNATIONAL, INC.
WARRANT NO. 3
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER, SALE OR OTHER DISPOSITION
OF THIS WARRANT OR SUCH SHARES MAY BE MADE UNLESS A REGISTRATION STATEMENT WITH
RESPECT TO THIS WARRANT OR SUCH SHARES HAS BECOME EFFECTIVE UNDER SAID ACT, AND
SUCH REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS
OF ANY STATE HAS BECOME EFFECTIVE, OR AIRPORT SYSTEMS INTERNATIONAL, INC. HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AIRPORT
SYSTEMS INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED WITH RESPECT
TO SUCH PROPOSED DISPOSITION THEREOF, AND THAT SUCH DISPOSITION WILL NOT CAUSE
THE LOSS OF THE EXEMPTION UPON WHICH AIRPORT SYSTEMS INTERNATIONAL, INC. RELIED
IN ISSUING THIS WARRANT OR SUCH SHARES TO THE ORIGINAL OWNER THEREOF.
WARRANT TO PURCHASE 45,635
SHARES OF COMMON STOCK
FOR VALUE RECEIVED, AIRPORT SYSTEMS INTERNATIONAL, INC. (the "Company"), a
Kansas corporation, hereby certifies that KCEP VENTURES II, L.P., or any
permitted transferee of this Warrant (the "Holder"), is entitled to purchase
from the Company, at any one time in whole, or from time to time in part, during
the seven-year period commencing February 7, 2000 and ending at 5:00 p.m.,
Kansas City time, on February 7, 2007, forty-five thousand six hundred
thirty-five (45,635) fully paid and nonassessable shares of the authorized but
presently unissued common stock, $.01 par value, of the Company ("Common Stock")
at a purchase price of $3.30 per share; PROVIDED, HOWEVER, that the number of
shares of Common Stock to be delivered upon any exercise of this Warrant and the
purchase price to be paid for each such share, shall be subject to adjustment
from time to time as hereinafter set forth; and, PROVIDED FURTHER, that the
Purchaser shall not make any partial purchase of Warrant Shares unless the total
number of Warrant Shares to be purchased in such partial purchase shall be equal
to or greater than 10,000. The Company covenants and agrees that it will pay
when due any and all taxes which may be payable in connection with the issuance
of this Warrant, or the issuance of any Warrant Shares upon the exercise of this
Warrant; but the Company shall not be required to pay any tax in respect to any
subsequent transfer of this Warrant or the Warrant Shares. The shares of Common
Stock issuable and issued upon such exercise, as so adjusted from time to time,
together with all shares of Common Stock issuable and issued pursuant to other
Warrants which may be issued upon transfer or partial exercise of this Warrant,
are hereinafter referred to
<PAGE>
as the "Warrant Shares" and the purchase price, as adjusted, for each Warrant
Share which is in effect from time to time is hereinafter referred to as the
"Warrant Price."
1. EXERCISE OF WARRANT.
1.1 EXERCISE OF WARRANT. The Holder may exercise this Warrant, as a whole
at any one time or in part from time to time during the seven-year period
commencing February 7, 2000 and ending at 5:00 p.m., Kansas City time, on
February 7, 2007, by the surrender of this Warrant, together with the Notice of
Exercise attached hereto duly executed and specifying therein the number of
Warrant Shares to be purchased upon such exercise (which number shall be equal
to or greater than 10,000) and the Warrant Price then in effect and containing
the requisite information required to be furnished therein, at the then
principal executive office of the Company, accompanied by payment, in the manner
set forth below, equal to the Warrant Price in effect at the date of such
exercise multiplied by the total number of Warrant Shares to be purchased upon
such exercise. Payment for Warrant Shares purchased upon any such exercise shall
be made by wire transfer payable in available funds to the order of the Company.
If any such exercise is for less than all of the Warrant Shares then issuable
under this Warrant, such exercise shall be for a number of whole Warrant Shares
and the Company at its expense promptly shall issue and deliver to the Holder a
new Warrant covering on the face thereof the number of Warrant Shares in respect
of which this Warrant is not then exercised. Upon receipt by the Company of this
Warrant at the office or agency of the Company, along with payment and the
Notice of Exercise, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
1.2 COMPANY TO REAFFIRM OBLIGATIONS. The Company, at the time of each
exercise of this Warrant, upon the request of the Holder, will acknowledge in
writing its continuing obligation to afford to the Holder any rights (including,
without obligation, any right to registration or qualification of the Warrant
Shares or other securities, if any, issued upon such exercise) to which the
Holder shall continue to be entitled after such exercise pursuant to the
provisions hereof; PROVIDED that if the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to the Holder any such rights.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable (and in no event later than 10 days) after each exercise and
surrender of this Warrant, the Company, at its expense (including the payment by
it of any applicable issue taxes), will cause to be issued and delivered to the
Holder a certificate or certificates, registered in the name of the Holder, for
the number of fully paid and nonassessable Warrant Shares to which the Holder
shall be entitled upon such exercise, plus, in lieu of any fractional Warrant
Shares to which the Holder would otherwise be entitled, cash in an amount equal
to the fair value of such fractional Warrant Shares as of the date of exercise
determined as follows:
(a) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange, or quoted on
the Nasdaq National Market ("Nasdaq") the current value shall be the last
reported sale price of the Common Stock on such exchange or market on the
last business day prior to the date of
<PAGE>
exercise of this Warrant or if no such sale is made on such day, the
average closing bid and asked prices for such day on such exchange or
market; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last
reported bid and asked prices reported by the Nasdaq (or, if not so quoted
on Nasdaq, by the National Quotation Bureau, Inc.) on the last business
day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current value shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the Board of Directors of
the Company, such determination to be final and binding on the Holder.
Together with the Certificates for the Warrant Shares, the Company shall also
deliver any other stock or other securities (collectively, "Other Securities")
and property (including cash, where applicable) to which such Holder may be
entitled upon such exercise pursuant to the provisions hereof.
3. AUTHORIZATION AND RESERVATION OF WARRANT SHARES. The Company represents
and warrants to the Holder that (a) it has all requisite corporate power and
authority, and has taken all necessary corporate action, to issue and deliver
this Warrant, to authorize and reserve for issuance and, upon payment of the
Warrant Price therefor, to issue and deliver the Warrant Shares, and (b) the
execution and delivery of this Warrant and the consummation of the transactions
herein contemplated will not result in a breach or violation of, or constitute a
default or an event permitting acceleration of the rights of any third party
under, the Articles of Incorporation, as amended, or the Amended and Restated
Bylaws of the Company or any mortgage, lease, indenture, agreement, instrument,
statute, decree, order, judgment, rule or regulation to which the Company is
subject or a party. The Company agrees that, prior to the expiration of this
Warrant, the Company at all times will have authorized and in reserve, solely
for issuance and delivery upon the exercise of this Warrant, the total number of
Warrant Shares as from time to time may be issuable upon exercise of this
Warrant, and shall keep such Warrant Shares, as well as any and all Other
Securities and property as from time to time shall be deliverable to the Holder
upon the exercise of this Warrant, available for delivery to the Holder, free
and clear of all restrictions on, and preemptive rights with respect to, such
issuance and delivery.
4. REORGANIZATION, CONSOLIDATION, MERGER, ETC.
4.1 GENERAL. If, at any time or from time to time when this Warrant
remains outstanding, the Company shall (a) effect a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended, or (b)
merge into any other person, firm or entity or (c) transfer all or substantially
all of its property or assets to any other person, firm or entity under any plan
or arrangement contemplating the exchange of the Company's stock or assets for
stock and/or other property (including cash) with, in the circumstance described
in this Section 4.1(c), the view to distributing such stock and/or other
property (including cash) to the Company's stockholders upon the dissolution of
the Company within 24 months after the date of
<PAGE>
such transfer, then, and in each such case, the Holder of this Warrant, upon the
exercise hereof as provided in Section 1 at any time after the effective date of
such reorganization or merger, or the effective date of such transfer and
dissolution, as the case may be, shall be entitled to receive (and the Company
shall be required to deliver), in lieu of the Common Stock (or Other Securities)
issuable upon such exercise prior to such effective date, the stock and/or other
property (including cash) to which the Holder would have been entitled
immediately following such effective date if the Holder had so exercised this
Warrant immediately prior thereto (or on the record date with respect to said
transaction if such exercise on such date otherwise would have been a condition
to the receipt of such stock and/or other property).
4.2 REPLACEMENT OF WARRANT. Upon any reorganization or merger or any
transfer and subsequent dissolution described in subsection 4.1 hereof, each
Warrant Share purchasable upon exercise of this Warrant shall be deemed
thereafter to have been replaced for the purposes hereof by the stock and/or
other property (including cash) issued or distributed in respect of one share of
Common Stock of the Company as a consequence of such reorganization, merger, or
such transfer and dissolution, as the case may be, and adequate provision to
effect such replacement shall be made at the time thereof, and notice of the
provision for such replacement so proposed to be made shall be mailed to the
Holder, together with the notice of such reorganization, merger or transfer and
dissolution as provided in Section 6 hereof.
4.3 RECAPITALIZATION. If, at any time or from time to time when this
Warrant remains outstanding, the Company shall effect a recapitalization of such
character that the Warrant Shares shall be changed into or become exchangeable
for a larger or smaller number of shares of Common Stock, then thereafter the
number of Warrant Shares which the Holder shall be entitled to receive upon
exercise of this Warrant shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares of Common
Stock of the Company by reason of such recapitalization, and the Warrant Price
of such recapitalized Warrant Shares shall, in the case of an increase in the
number of shares of Common Stock of the Company, be proportionately reduced, and
in the case of a decrease in the number of shares of Common Stock of the
Company, be proportionately increased. An adjustment made pursuant to this
subsection 4.3 shall become effective as of the effective date of such
recapitalization.
4.4 OTHER ADJUSTMENTS, WARRANT SHARES ADJUSTED. The Company, by action of
its Board of Directors, shall make such other equitable adjustments to the
Exercise Price as may be necessary to protect the Holder against dilution of
this Warrant, as contemplated in this Section 4.
5. ADJUSTMENTS TO PREVENT DILUTION.
5.1 ADJUSTMENTS FOR STOCK DIVIDENDS, ETC. If the Company shall pay a
dividend in shares of its Common Stock, subdivide (split) its outstanding shares
of Common Stock, combine (reverse split) its outstanding shares of Common Stock,
or issue by reclassification of its shares of Common Stock any shares or other
securities of the Company, the number of shares of Common Stock the Holder
hereof is entitled to purchase pursuant to this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive upon
exercise that number of shares of Common Stock which he or she would have owned
or
<PAGE>
would have been entitled to receive after the happening of any of the events
described above had this Warrant been exercised immediately prior to the
happening of such event, and the Warrant Price per share shall be
correspondingly adjusted. An adjustment made pursuant to this subsection 5.1
shall become effective immediately after the record date in the case of the
stock dividend or other distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. The Holder of this Warrant shall be entitled to participate in
any subscription or other rights offering made to holders of shares of Common
Stock (other than an offering of rights pursuant to a shareholder rights plan or
similar plan protecting control of the Company) as if it had purchased the full
number of shares as to which this Warrant remains unexercised immediately prior
to the record date for such rights offering.
5.2 ADJUSTMENT OF WARRANT PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF
COMMON STOCK. In case the Company shall issue Additional Shares of Common Stock
at a price per share of Common Stock less than the Warrant Price in effect on
the date of and immediately prior to such issue, then, and in such event, the
Warrant Price per Warrant Share shall be determined by dividing the Warrant
Price per Warrant Share by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding on the date of issuance of such Additional
Shares of Common Stock plus the number of Additional Shares of Common Stock
offered for subscription or purchase, and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of issuance of such
Additional Shares of Common Stock plus the number of shares which the aggregate
offering consideration of the total number of Additional Shares of Common Stock
so offered would purchase at such Warrant Price. Such adjustments shall be made
whenever such Additional Shares of Common Stock are issued. For the purpose of
this subsection 5.2, the term "Additional Shares of Common Stock" shall mean all
shares of Common Stock, plus rights, options or warrants to subscribe for,
purchase or otherwise acquire shares of Common Stock, or securities convertible
or exchangeable into shares of Common Stock; provided, however, that such term
shall not mean stock awards, rights, options or warrants granted to directors,
management or employees of the Company pursuant to any director, management or
employee plans approved by the Board of Directors of the Company.
5.3 LIMITATIONS ON ADJUSTMENTS. No adjustment shall be required pursuant
to the provisions of subsection 5.1 or 5.2 hereof unless such adjustment would
require a change of at least 1 % in the Warrant Price; PROVIDED, however, that
any adjustments which, pursuant to the provisions of this subsection 5.3, are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment.
5.4 CERTIFICATE AS TO ADJUSTMENTS. Whenever the Warrant Price and/or
number of Warrant Shares is adjusted as provided in this Warrant and upon any
modification of the rights of the Holder in accordance with the provisions of
this Warrant, the Company shall (a) promptly prepare a certificate, signed by
the Company's chief financial officer, setting forth the Warrant Price and the
number of Warrant Shares after such adjustment or the effect of such
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and (b) cause copies of such
certificate to be mailed (in accordance with Section 13 below) to the Holder of
this Warrant.
<PAGE>
6. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a cash dividend payable
out of earned surplus of the Company) or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
the type described in Section 4.1(c) of all or substantially all the
assets of the Company to or merger of the Company into any other person,
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities (other than in a transaction or
pursuant to the exercise of a warrant, right or option which, pursuant to
the provisions of Sections 4 or 5 hereof would not give rise to any
adjustment of the Warrant Shares or Warrant Price), or any right or option
(other than rights or options under any employee stock bonus, stock
purchase or stock option plan) to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities (other
than the issuance of Warrant Shares or Other Securities upon the exercise
of this Warrant),
then and in each such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding-up is to take place, and
the time, if any, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least 20 days prior to the date
therein specified.
7. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation, as amended, or through any reorganization, transfer
of assets, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
such dilution or such other impairment. Without limiting the generality of the
foregoing, the Company
<PAGE>
(a) will not increase the par value of any shares of stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
stock upon the exercise of this Warrant and (c) will not make a transfer of the
type described in Section 4.1(c) of all or substantially all of its properties
and assets to any other person (corporate or otherwise), or merge into any other
person or permit any such person to merge into the Company (if the Company is
not the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of this Warrant.
8. TRANSFERABILITY OF WARRANTS.
8.1 SECURITIES ACT OF 1933. This Warrant or the Warrant Shares or any
other security issued or issuable upon exercise of this Warrant may not be
offered or sold except in compliance with the Securities Act of 1933, as
amended, and then only against receipt of an agreement of such person to whom
such offer of sale is made to comply with the provisions of this subsection 8.1
with respect to any resale or other disposition of such securities.
The Company may cause the following legend to be set forth on each
certificate representing Warrant Shares or any other security issued or issuable
upon exercise of this Warrant not theretofore distributed to the public pursuant
to a registered offering or sold to underwriters for distribution to the public
pursuant to a registered offering, unless counsel for the Company is of the
opinion as to any such certificate that such legend is unnecessary:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE. NO TRANSFER, SALE OR OTHER DISPOSITION
OF THE SHARES MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID
ACT, AND SUCH REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY
UNDER THE SECURITIES LAWS OF ANY STATE, HAS BECOME EFFECTIVE, OR
AIRPORT SYSTEMS INTERNATIONAL, INC. HAS BEEN FURNISHED WITH AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH
REGISTRATION OR QUALIFICATION IS NOT REQUIRED WITH RESPECT TO SUCH
PROPOSED DISPOSITION THEREOF AND THAT SUCH DISPOSITION WILL NOT
CAUSE THE LOSS OF THE EXEMPTION UNDER THE SECURITIES LAW ON WHICH
AIRPORT SYSTEMS INTERNATIONAL, INC. ORIGINALLY RELIED IN ISSUING OR
SELLING THE SHARES TO THE ORIGINAL HOLDER THEREOF.
8.2 OTHER LIMITATIONS. This Warrant may be sold, transferred, assigned or
hypothecated, in whole or in part, only to (a) partners of Kansas City Equity
Partners L.C., or KCEP Ventures II, L.P., (b) successors to Kansas City Equity
Partners L.C., or KCEP Ventures
<PAGE>
II, L.P., in a merger, consolidation or other reorganization, (c) transferees,
or officers of transferees of Kansas City Equity Partners L.C., or KCEP Ventures
II, L.P., in the event of liquidation or dissolution of either such entity, or
(d) a purchaser, or officers of a purchaser, of substantially all of the assets
of Kansas City Equity Partners L.C., or KCEP Ventures II, L.P., and shall be so
transferable only upon the books of the Company which the Company shall cause to
be maintained for such purpose, provided however, any such transfer is in an
amount which permits the transferee to purchase a minimum of 10,000 Warrant
Shares, unless otherwise consented to by the Company. The Company may treat the
registered holder of this Warrant appearing on the Company's books at any time
as the Holder for all purposes.
9. REGISTRATION RIGHTS. Pursuant to that certain Investor's Rights
Agreement, dated as of the date hereof, by and between the Company and KCEP
Ventures II, L.P., KCEP Ventures II, L.P. has received certain "demand" and
"piggy-back" registration rights with respect to the Warrant Shares.
10. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
11. EXCHANGE LISTING. Prior to the issuance of any Warrant Shares, the
Company at its own expense, shall secure the listing of such shares upon any
securities exchange upon which shares of the Company's Common Stock are listed.
12. WARRANT HOLDER NOT STOCKHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent or
to receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
13. NOTICES AND COMMUNICATIONS. No notice or other communication under
this Warrant shall be effective unless, but any notice or other communication
shall be effective and shall be deemed to have been given if, the same is in
writing and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 11300 West 89th Street, Overland Park, Kansas
66214, Attention: President, or such other address as the Company has
designated in writing to the Holder, or
(b) the Holder at 233 West 47th Street, Kansas City, Missouri 64112,
or such other address as the Holder has designated in writing to the
Company.
14. HEADINGS. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
15. APPLICABLE LAW. This Warrant shall be governed by and construed and
enforced in accordance with the laws of the State of Kansas.
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound and to bind its
successors and assigns, AIRPORT SYSTEMS INTERNATIONAL, INC. has caused this
Warrant to be signed by its President and attested by its Secretary this 7th day
of February, 2000.
AIRPORT SYSTEMS INTERNATIONAL, INC.
ATTEST:
By __________________________________
Keith S. Cowan, President
By ____________________________
Secretary
<PAGE>
NOTICE OF EXERCISE
The undersigned, ____________________, holder of the Warrant, dated
February 7, 2000, granted by Airport Systems International, Inc., hereby (1)
exercises the right to purchase ______ shares of Common Stock, $.01 par value,
of Airport Systems International, Inc. which the undersigned is entitled to
purchase under the terms of such Warrant, and (2) makes payment in full for the
number of shares of Common Stock so purchased by payment of $_______________
(such sum being the product obtained by multiplying the number of shares
specified above by the Warrant Price of $_______________ per share in effect at
the date hereof).
Please issue the certificate for shares of Common Stock in the name
of, and pay any cash for any fractional shares, to:
- --------------------------------------------------------------------------------
Print or type name
- --------------------------------------------------------------------------------
Social Security or other identifying tax number
- --------------------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------------------
City State Zip Code
and, if said number of shares shall not be all the shares purchasable
thereunder, a new warrant for the unexercised portion of such Warrant issued to:
- --------------------------------------------------------------------------------
Print or type name
- --------------------------------------------------------------------------------
Social Security or other identifying tax number
- --------------------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------------------
City State Zip Code
Dated:_________________________ __________________________________________
Signature
(signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
LETTER OF CREDIT, LOAN AND SECURITY AGREEMENT
THIS LETTER OF CREDIT, LOAN AND SECURITY AGREEMENT (this "Agreement") is
made as of this 7th day of February, 2000, between AIRPORT SYSTEMS
INTERNATIONAL, INC., a Kansas corporation ("ASI"), and DCI, INC., a Kansas
corporation and a wholly-owned subsidiary of ASI ("DCI"; ASI and DCI being
hereinafter sometimes collectively referred to as the "Borrowers"), and BANK OF
AMERICA, N.A., a national banking association (the "Bank").
RECITALS
WHEREAS, the Borrowers have applied to the Bank for a direct loan (the
"Loan") and for a commitment by the Bank to issue standby and commercial letters
of credit to designated beneficiaries for the account of the Borrowers (the
"Letters of Credit"), the Borrowers' Obligations with respect to which shall not
exceed United States Six Million Dollars (U.S. $6,000,000) in the aggregate
amount at any one time outstanding, to be used to finance export working capital
requirements of ASI; and
WHEREAS, the Bank is willing to extend the Loan to the Borrowers and to
issue the Letters of Credit, if requested, upon the terms and subject to the
conditions of this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual agreements herein and other
good and valuable consideration, the Borrowers and the Bank hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ACCOUNT DEBTOR" means the Person who is obligated on a
Receivable.
"ACQUIRE", as applied to any Business Unit or Investment, means
the acquisition of such Business Unit or Investment by purchase, exchange,
issuance of stock or other securities, or by merger, reorganization or any other
method.
"AFFILIATE" means, with respect to a Person, (a) any executive
officer, director, employee or managing agent of such Person, (b) any spouse,
parents, brothers, sisters, children and grandchildren of such Person, (c) any
association, partnership, trust,
<PAGE>
entity or enterprise in which such Person is a director, executive officer or
general partner, (d) any other Person that, (i) directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such given Person, (ii) directly or indirectly beneficially owns
or holds 10% or more of any class of voting stock or partnership or other
interest of such Person or any Subsidiary of such Person, or (iii) 10% or more
of the voting stock or partnership or other interest of which is directly or
indirectly beneficially owned or held by such Person or a Subsidiary of such
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or partnership or other
interests, by contract or otherwise.
"AGREEMENT" shall mean this Letter of Credit, Loan and Security
Agreement, including the Exhibits and Schedules hereto, as it may from time to
time be amended, supplemented or otherwise modified in accordance with the terms
hereof.
"APPLICATION AND AGREEMENT FOR COMMERCIAL LETTER OF CREDIT" shall
mean an Application and Agreement for Commercial Letter of Credit in
substantially the form attached hereto as EXHIBIT A and made a part hereof, or
in such other form which is provided by the Bank to the Borrowers as the form of
Application and Agreement which is then in use by the Bank in connection with
the issuance of its Commercial Letters of Credit, which is executed by the
Borrowers and delivered to the Bank in connection with a request for the
issuance of a Commercial Letter of Credit.
"APPLICATION AND AGREEMENT FOR STANDBY LETTER OF CREDIT" shall
mean an Application and Agreement for Standby Letter of Credit in substantially
the form attached hereto as EXHIBIT B and made a part hereof, or in such other
form which is provided by the Bank to the Borrowers as the form of Application
and Agreement which is then in use by the Bank in connection with the issuance
of its Standby Letters of Credit, which is executed by the Borrowers and
delivered to the Bank in connection with a request for the issuance of a Standby
Letter of Credit.
"ASSETS" means all assets of a Person determined in accordance
with GAAP and includable on a balance sheet of such Person prepared in
accordance with GAAP.
"AUTHORIZED BORROWERS' REPRESENTATIVE" shall have the meaning
given to such term in SECTION 4.6 of this Agreement.
"AVAILABLE COMMITMENT" shall mean, at any particular time, an
amount equal to the DIFFERENCE BETWEEN (a) the lesser of (i) the amount of the
Commitment at such time, (ii) $8,000,000 less the outstandings under the line of
credit in the maximum amount of U.S. $3,000,000 which is being extended by the
Bank to the Borrowers as part of the Domestic Financing, (iii) the Collateral
Value at such time and (iv) the export working capital needs of ASI, AND (b) the
Utilized Portion of the Commitment; provided,
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however that in no event will the Available Commitment for Loan advances and
Letters of Credit exceed the amount of the Commitment.
"BANK COMMITMENT LETTER" shall mean the Bank's Commitment Letter
dated January 14, 2000, addressed to ASI.
"BENEFIT PLAN" means an employee benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or any Related Company is, or within the immediately preceding 6 years
was, an "employer" as defined in Section 3(5) of ERISA, including such plans as
may be established after the Agreement Date.
"BORROWERS' ACCOUNT" shall mean the Borrowers' account number
332200008673 with the Bank.
"BORROWERS' OBLIGATIONS" shall mean, collectively, the Loan
Obligations and the Letter of Credit Obligations, together with all other sums
due from the Borrowers to the Bank under the terms of the Financing Documents.
"BORROWING BASE CERTIFICATE" shall mean a Certificate in
substantially the form attached hereto as EXHIBIT C and made a part hereof,
which is completed and executed by ASI and delivered to the Bank at such times
as are required by the terms and conditions of SECTION 8.1(G) hereof.
"BUSINESS DAY" shall mean a day on which commercial banking
institutions are open for business in Kansas City, Missouri.
"BUSINESS UNIT" means the assets constituting the business, or a
division or operating unit thereof, of any Person.
"CAPITAL EXPENDITURE" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit) which are not, in accordance with
GAAP, treated as expense items for such Person in the year made or incurred or
as a prepaid expense applicable to a future year or years.
"COLLATERAL" means and includes all of each Borrower's right,
title and interest in and to each of the following, wherever located and whether
now or hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables;
(b) all Inventory;
3
<PAGE>
(c) all Equipment;
(d) all Contract Rights;
(e) all General Intangibles;
(f) all Deposit Accounts;
(g) all Real Estate;
(h) all goods and other property, whether or not delivered, (i)
the sale or lease of which gives or purports to give rise to any Receivable,
including, but not limited to, all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including, without
limitation, all rights of an unpaid vendor or lienor (including, without
limitation, stoppage in transit, replevin and reclamation) with respect to such
goods and other properties,
(i) all mortgages, deeds to secure debt and deeds of trust on
real or personal property, guaranties, leases, security agreements and other
agreements and property which secure or relate to any Receivable or other
Collateral or are acquired for the purpose of securing and enforcing any item
thereof,
(j) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and instruments
evidencing or pertaining to any and all items of Collateral,
(k) all files, correspondence, computer programs, tapes, disks
and related data processing software which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof,
(l) all cash deposited with the Bank or any Affiliate thereof or
which the Bank is entitled to retain or other possess as collateral pursuant to
the provisions of this Agreement or any of the Documents; and
(m) any and all products and cash and non-cash Proceeds of the
foregoing (including, but not limited to, any claims to any items referred to in
this definition and any claims against third parties for loss of, damage to or
destruction of any or all of the Collateral or for proceeds payable under or
unearned premiums with respect to policies of insurance) in whatever form,
including, but not limited to, cash, negotiable instruments and other
instruments for the payment of money, chattel paper, security agreement and
other documents.
4
<PAGE>
"COLLATERAL VALUE" shall mean the value of the Collateral, from
time to time, as determined in accordance with the provisions of Section 5.3 of
this Agreement.
"COMMERCIAL LETTER OF CREDIT" shall mean a Commercial Letter of
Credit issued for the account of the Borrowers by the Bank to a designated
beneficiary, which is supplying goods or services to ASI in connection with the
export of services or goods by ASI, upon receipt of an executed Application and
Agreement for Commercial Letter of Credit, which Commercial Letter of Credit
shall be issued subject to the UCP, shall be payable in Dollars and shall be in
form and content satisfactory to the Bank in all respects.
"COMMITMENT" shall mean the commitment of the Bank to extend to
or issue for the account of the Borrowers, as the case may be, the Loan and the
Letters of Credit in accordance with the terms and conditions of this Agreement,
the outstanding Borrowers' Obligations with respect to which shall not exceed
United States Six Million Dollars (U.S. $6,000,000) in the aggregate at any one
time outstanding.
"COMMITMENT PERIOD" shall mean the period during which the
Commitment will be available to be accessed by ASI, which period begins on the
Effective Date, provided all conditions precedent contained in Article VII
hereof have been satisfied, and ends on the Termination Date.
"CONTRACT RIGHTS" means and includes, as to any Person, all of
such Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"CURRENT RATIO" means the ratio of Borrowers' current Assets to
Borrowers' current Liabilities measured at any given time.
"DEBT SERVICE COVERAGE RATIO" means with respect to any period,
the ratio of (i) Net Income (excluding any after-tax gains or losses on the sale
of assets, (other than the sale of Inventory in the ordinary course of business)
and excluding other after-tax extraordinary gains or losses), PLUS interest
expense, PLUS depreciation and amortization deducted in determining Net Income
for such period, OVER (ii) current principal maturities of long term debt
(including without limitation all Subordinated Debt) and Capitalized Lease
Obligations (including without limitation all payments by the Borrowers under
the Bond Documents as defined in the documents relating to the Domestic
Financing) paid or scheduled to be paid during such period, PLUS interest
expense.
"DEFAULT" shall mean any of the events specified in SECTION 11.1
hereof, whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
5
<PAGE>
"DEPOSIT ACCOUNTS" means any demand, time, savings, passbook or
like account maintained with a bank, savings and loan association, credit union
or like organization, other than an account evidenced by a certificate of
deposit that is an instrument under the UCC.
"DOLLARS" and the sign "$" shall mean dollars in lawful money of
the United States of America and, in relation to all payments in Dollars
hereunder, shall mean same day or immediately available funds.
"DOMESTIC INVENTORY" shall mean all Inventory other than Export
Inventory.
"DOMESTIC FINANCING" shall mean the line of credit, letters of
credit and term loan facilities extended by the Bank to the Borrowers for the
purpose of refinancing certain existing debt and financing the Borrowers'
domestic working capital requirements, which line of credit is evidenced and
secured by a Loan and Security Agreement of even date herewith by and among the
Borrowers and the Bank and the other Loan Documents described therein.
"DOMESTIC RECEIVABLES" shall mean Receivables, the Account
Debtor with respect to which is a U.S. Person.
"EBITDA" means, with respect to any period, Net Income (or Net
Loss) plus interest expense, income tax expense, depreciation and amortization
for such period determined by GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time, and any successor statute.
"EFFECTIVE DATE" shall mean the later of (a) the date on which
this Agreement shall have been executed and delivered by the parties hereto and
(b) the first date on which all of the conditions precedent set forth in SECTION
7.1 shall have been satisfied in full or waived by the Bank.
"ENVIRONMENTAL LAWS" means all federal, state local and foreign
laws now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
6
<PAGE>
"EQUIPMENT" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising machinery,
apparatus, equipment, motor vehicles, tractors, trailers, rolling stock,
fittings, and other tangible personal property (other than inventory) of every
kind and description used in such Person's business operations or owned by such
Person or in which such Person has an interest and all parts, accessories and
special tools and all increases and accessions thereto and substitutions and
replacements therefor.
"EVENT OF DEFAULT" shall mean any of the events specified in
SECTION 11.1 hereof, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
"EXPORT INVENTORY" shall mean Inventory which is specifically
designated for sale to a non-U.S. Person. To the extent that it is not possible
to distinguish between Domestic Inventory and Export Inventory, 75% of the
Inventory of ASI shall be deemed to be Export Inventory and 25% of Inventory of
ASI shall be deemed to be Domestic Inventory.
"EXPORT RECEIVABLES" shall mean Receivables the Account Debtor
with respect to which is a non-U.S. Person.
"EXIMBANK" shall mean the Export-Import Bank of the United
States, an agency of the government of the United States, its successors and
assigns.
"EXIMBANK BORROWER AGREEMENT" shall mean the Borrower Agreement
of even date herewith executed by the Borrowers in favor of EXIMBANK and
acknowledged by the Bank, which is required by EXIMBANK as a condition to the
EXIMBANK Guaranty.
"EXIMBANK GUARANTY" shall mean EXIMBANK Master Guarantee
Agreement between the Bank and EXIMBANK, together with the Delegated Authority
Letter Agreement between the Bank and EXIMBANK, pursuant to which EXIMBANK has
guaranteed to the Bank a portion of the Borrowers' Obligations, as provided
therein.
"FINANCING DOCUMENTS" shall mean, collectively, the Bank
Commitment Letter, this Agreement, all Applications and Agreements for Standby
Letters of Credit and Standby Letters of Credit issued pursuant thereto, all
Applications and Agreements for Commercial Letters of Credit and Commercial
Letters of Credit issued pursuant thereto, the Promissory Note, the EXIMBANK
Borrower Agreement, the EXIMBANK Guaranty, the Subordination Agreements and any
other documents, certificates and agreements which are hereafter executed and
delivered by the Borrower or any other Person in connection with any of the
Borrowers' Obligations.
7
<PAGE>
"FIXED CHARGES" means, for any period, (a) Interest Expense, plus
(b) payments of principal actually made with respect to Indebtedness, including
payments with respect to Capitalized Leases.
"FUNDED DEBT RATIO" means Indebtedness for Money Borrowed (but
specifically excluding Subordinated Debt) PLUS outstanding letters of credit
over EBITDA.
"GAAP" means generally accepted principles consistently applied
and maintained throughout the period indicated and consistent with the prior
financial practice of the Person referred to.
"GENERAL INTANGIBLES" means, as to any Person, all of such
Person's then owned or existing and future acquired or arising general
intangibles, choses in action and causes of action and all other intangible
personal property of such Person of every kind and nature (other than
Receivables), including, without limitation, Intellectual Property, corporate or
other business records, inventions, designs, blueprints, plans, specifications,
trade secrets, goodwill, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, reversions or any rights thereto and
any other amounts payable to such Person from any Benefit Plan, Multiemployer
Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which such Person is beneficiary and any letter of credit, guarantee, claims,
security interest or other security held by or granted to such Person to secure
payment by an Account Debtor of any of the Receivables.
"GOVERNMENTAL APPROVALS" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local foreign
national or provincial, and all agencies thereof.
"GOVERNMENTAL AUTHORITY OR AUTHORITIES" shall mean any
governmental or quasi-governmental entity, court or tribunal including, without
limitation, any department, commission, board, bureau, agency, administration,
service or other instrumentality of any foreign or domestic governmental entity,
but excluding EXIMBANK.
"GUARANTY", "GUARANTEED" or to "GUARANTEE," as applied to any
obligation of another Person shall mean and include:
(a) a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), directly or
indirectly, in any manner, of any part or all of such obligation of such other
Person, and
8
<PAGE>
(b) an agreement, direct or indirect, contingent or otherwise,
and whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damage in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by (i) the purchase of securities or obligations, (ii) the purchase,
sale or lease (as lessee or lessor) of property or the purchase or sale of
services primarily for the purpose of enabling the obligor with respect to such
obligation to make any payment or performance (or payment of damages in the
event of nonperformance) of or on account of any part or all of such obligation
or to assure the owner of such obligation against loss, (iii) supplying of funds
to, or in any other manner investing in, the obligor with respect to such
obligation, (iv) repayment of amounts drawn down by beneficiaries of letters of
credit, or (v) the supplying of funds to or investing in a Person on account of
all or any part of such Person's obligation under a guaranty of any obligation
or indemnifying or holding harmless, in any way, such Person against any part or
all of such obligation.
"ISP" shall mean the International Standby Practices - ISP98,
International Chamber of Commerce Publication No. 590, and any amendments and
revisions thereof.
"INDEBTEDNESS" of any Person means, without duplication, (a)
Liabilities, (b) all obligations for Money Borrowed or for the deferred purchase
price of property or services or in respect of reimbursement obligations under
letters of credit, (c) all obligations represented by bonds, debentures, notes
and accepted drafts that represent extensions of credit, (d) Capitalized Lease
Obligations, (e) all obligations (including, during the noncancellable term of
any lease in the nature of a title retention agreement, all future payment
obligations under such lease discounted to their present value in accordance
with GAAP) secured by any Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation secured thereby shall have
been assumed by such Person, (f) all obligations of other Persons which such
Person has Guaranteed, including, but not limited to, all obligations of such
Person consisting of recourse liability with respect to accounts receivable sold
or otherwise disposed of by such Person, and (g) in the case of the Borrowers
(without duplication) the Loans.
"INTELLECTUAL PROPERTY" means, as to any Person, all of such
Person's then owned existing and future acquired or arising patents, patent
rights, copyrights, works which are the subject of copyrights, trademarks,
service marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to sue for past, present and future infringements of any of the
foregoing.
"INTEREST EXPENSE" means interest on Indebtedness during the
period for which computation is being made, excluding (a) the amortization of
fees and costs
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incurred with respect to the closing of loans which have been capitalized as
transaction costs, and (b) interest paid in kind.
"INTEREST RATE PROTECTION AGREEMENT" means (a) any and all rate
swap transactions, basis swaps, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, or any other similar transactions or any
combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to
any master agreement, or (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Associations, Inc., or any other master agreement (any such
master agreement, together with any related schedules, as amended, restated,
extended, supplemented or otherwise modified in writing from time to time, a
"Master Agreement"), including but not limited to any such obligations or
liabilities under any Master Agreement.
"INVENTORY" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) goods
intended for sale or lease or for display or demonstration, (b) work in process,
(c) raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of goods or
otherwise used or consumed in the conduct of business, and (d) documents
evidencing and general intangibles relating to any of the foregoing.
"INVESTMENT" means, with respect to any Person: (a) the direct or
indirect purchase or acquisition of any beneficial interest in, any share of
capital stock of, evidence of Indebtedness of or other security issued by any
other Person, (b) any loan, advance or extension of credit to, or contribution
to the capital of, any other Person, excluding advances to employees in the
ordinary course of business for business expenses, (c) any Guaranty of the
obligations of any other Person, or (d) any commitment or option to take any of
the actions described in clauses (a), (b) or (c) above.
"LETTER OF CREDIT" shall mean either a Commercial Letter of
Credit or a Standby Letter of Credit.
"LETTER OF CREDIT OBLIGATIONS" shall mean, in respect of each
Standby Letter of Credit and each Commercial Letter of Credit, as the case may
be, the obligation of the Borrowers to pay to the Bank all sums required to be
paid by the terms of the related Application and Agreement for Standby Letter of
Credit or Application and
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Agreement for Commercial Letter of Credit and any related Borrowers' Obligations
described by the terms of this Agreement.
"LIABILITIES" means all liabilities of a Person determined in
accordance with GAAP and includable on a balance sheet of such Person prepared
in accordance with GAAP, including without limitation, the obligations of the
Borrowers under the Bond Documents (as defined in the documents relating to the
Domestic Financing).
"LIABILITIES RATIO" means Liabilities PLUS outstanding letters of
credit LESS Subordinated Debt OVER Tangible Net Worth. For purposes of this
definition, the obligations of the Borrowers under the Bond Documents will not
be "double counted" with the Bond Letter of Credit Obligations (as such terms
are defined in the documents relating to the Domestic Financing.
"LIEN" shall mean any mortgage, security deed or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, security title, easement or encumbrance, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including (without limitation) any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and any security interest under the UCC or comparable law
of any jurisdiction.
"LOAN" shall mean the direct loan advances to be made available
by the Bank to ASI in accordance with the provisions of ARTICLE II of this
Agreement.
"LOAN OBLIGATIONS" shall mean the obligation of the Borrowers to
repay to the Bank the principal amount of the Loan, together with interest
thereon, in accordance with the terms of the Promissory Note, and any related
Borrowers' Obligations described by the terms of this Agreement and the
Promissory Note.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the business, assets, operations, prospects or financial or other condition
of any Borrower or any Guarantor, (b) the Borrowers' ability to pay and perform
the Borrowers' Obligations in accordance with the terms of this Agreement and
the other Financing Documents, (c) the Collateral, the Bank's Lien on the
Collateral or the priority of the Bank's Lien on the Collateral, or (d) the
Bank's rights and remedies under this Agreement or any of the other Financing
Documents.
"MONEY BORROWED" means, as applied to Indebtedness, (a)
Indebtedness for money borrowed, (b) Indebtedness, whether or not in any such
case the same was for money borrowed, (i) represented by notes payable and
drafts accepted, that represent extensions of credit, (ii) constituting
obligations evidenced by bonds, debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily paid (other than trade
Indebtedness) or that was issued or assumed as full or partial payment for
property,
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(c) Indebtedness that constitutes a Capitalized Lease Obligation, and
(d) Indebtedness that is such by virtue of clause (f) of the definition thereof,
but only to the extent that the obligations Guaranteed are obligations that
would constitute Indebtedness for Money Borrowed.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which either Borrower or a Related Company is
required to contribute or has contributed within the immediately preceding 6
years.
"NET INCOME" or "NET LOSS" means, as applied to any Person, the
net income (or net loss) of such Person for the period in question after giving
effect to deduction of or provision for all operating expenses, all taxes and
reserves (including reserves for deferred taxes and all other proper
deductions), all determined in accordance with GAAP.
"NET WORTH" of any Person means the total shareholders' equity
(including Subordinated Indebtedness, capital stock, additional paid-in capital
and retained earnings, after deducting treasury stock) which would appear as
such on a balance sheet of such Person prepared in accordance with GAAP.
"OPERATING LEASE" means any lease (other than a lease
constituting a Capitalized Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"PERMITTED INDEBTEDNESS FOR MONEY BORROWED" means (a) Permitted
Purchase Money Indebtedness, and (b) Subordinated Indebtedness.
"PERMITTED INVESTMENTS" means Investments of the Borrowers in:
(a) negotiable certificates of deposit, time deposits and banker's acceptances
issued by the Bank or any Affiliate of the Bank or by any United States bank or
trust company having capital, surplus and undivided profits in excess of
$250,000,000, (b) any direct obligation of the United States of America or any
agency or instrumentality thereof which has a remaining maturity at the time of
purchase of not more than one year and repurchase agreements relating to the
same, (c) sales on credit in the ordinary course of business on terms customary
in the industry, and (d) notes, accepted in the ordinary course of business,
evidencing overdue accounts receivable arising in the ordinary course of
business.
"PERMITTED LIENS" shall mean, with respect to a Borrower, (a)
Liens for taxes, assessments or other governmental charges or levies not
delinquent, or being contested in good faith and by appropriate proceedings and
with respect to which proper reserves have been taken by such Borrower;
PROVIDED, THAT, the Lien shall have no effect
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on the priority of the Liens in favor of the Bank or the value of the assets in
which the Bank has such a Lien and a stay of enforcement of any such Lien shall
be in effect; (b) deposits or pledges securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (c) deposits or pledges securing bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of such Borrower's business; (d) judgment Liens
that have been stayed or bonded or in respect of which the Borrowers are fully
protected by insurance (subject to a reasonable deductible); (e) mechanics',
workers', materialmen's or other like Liens arising in the ordinary course of
Borrower's business with respect to obligations which are not due; (f) Liens
placed upon fixed assets hereafter acquired to secure a portion of the purchase
price thereof, provided, that, any such Lien shall not encumber any other
property of Borrower; (g) security interests being terminated concurrently with
the execution of the Financing Documents; (h) Liens specifically described in
and created by the Bond Documents (as defined in the documents relating to the
Domestic Financing); (i) Liens in favor of the Bank securing the Borrowers'
Obligations; (j) Liens in favor of the Bank securing the Domestic Financing and
(k) subordinated liens with respect to the Subordinated Indebtedness (as defined
in the documents relating to the Domestic Financing).
"PERMITTED OVERADVANCES" shall mean Loan advances made to ASI or
Letters of Credit issued for the account of the Borrowers in an aggregate amount
which would cause the Collateral Value to be exceeded, provided that (i) the
aggregate amount of such Permitted Overadvances does not exceed five percent
(5%) of the Commitment; (ii) the aggregate amount of all outstanding Borrowers'
Obligations including Borrowers' Obligations in respect of Permitted
Overadvances does not exceed the Commitment; and (iii) such Permitted
Overadvances are not outstanding for more than ninety (90) consecutive days.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means Purchase Money
Indebtedness secured only by Purchase Money Liens and Capitalized Lease
Obligations, incurred by the Borrower after the Agreement Date, up to an
aggregate amount outstanding at any time equal to $50,000.
"PERSON" shall mean an individual, a partnership, a corporation,
a trust, any other organization or entity or any government or governmental body
or authority.
"PRIME RATE" means during the period from the Effective Date
through the last day of the month in which the Effective Date falls, the per
annum rate of interest publicly announced by the Bank at its principal office as
its "prime rate" as in effect on the Effective Date, and thereafter during each
succeeding calendar month, means such "prime rate' as in effect on the last
Business Day of the immediately preceding calendar month. Any change in an
interest rate resulting from a change in the Prime Rate shall become effective
as of 12:01 a.m. on the first day of the month following the month in
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which such change was announced. The Prime Rate is a reference used by the Bank
in determining interest rates on certain loans and is not intended to be the
lowest rate of interest charged on any extension of credit to any debtor.
"PROCEEDS" or "PROCEEDS" means, when used with respect to any of
the Collateral, all cash and non-cash proceeds within the meaning of the UCC and
shall include the proceeds of any and all insurance policies.
"PROCEEDS OF THE EXPORT RECEIVABLES AND EXPORT INVENTORY" shall
mean all cash and non-cash proceeds of the Borrowers' Export Receivables and
Export Inventory, all of which constitute part of the Collateral.
"PROMISSORY NOTE" shall mean the Promissory Note of even date
herewith executed by the Borrowers in favor of the Bank and containing the terms
and conditions under which the principal amount of the Loan, together with
interest thereon, will be repaid, as the same may from time to time be amended,
supplemented or otherwise modified in accordance with the terms thereof and of
this Agreement.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness created to
finance the payment of all or any part of the purchase price (not in excess of
the fair market value thereof) of any tangible asset (other than Inventory) and
incurred at the time of or within 10 days prior to or after the acquisition of
such tangible asset.
"PURCHASE MONEY LIEN" means any Lien securing Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
tangible asset (other than Inventory) the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.
"RECEIVABLES" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) rights to the
payment of money or other forms of consideration of any kind (whether classified
under the UCC as accounts, contract rights, chattel paper, general intangibles
or otherwise) including, but not limited to, accounts receivable, letters of
credit and the right to receive payment thereunder, chattel paper, tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments, documents,
acceptances and all other debts, obligations and liabilities in whatever form
from any Person and guaranties, security and liens securing payment thereof, (b)
goods, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise to , any such right to payment or other debt,
obligation or liability, and (c) cash and non-cash proceeds of any of the
foregoing.
"RELATED COMPANY" means, as to any Person, any (a) corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as such Person, (b) partnership or other
trade or business (whether or
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not incorporated under common control (within the meaning of Section 414(c) of
the Code) with such Person, or (c) member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as such Person or any
corporation described in clause (a) above or any partnership, trade or business
described in clause (b) above.
"RESTRICTED DISTRIBUTION" by any Person means (a) its retirement,
redemption, purchase, or other acquisition for value of any capital stock or
other equity securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities or partnership interests, (c) any loan or advance by such Person
to, or other investment by such Person in, the holder of any of such securities
or partnership interests, and (d) any other payment by such Person in respect of
such securities or partnership interests.
"RESTRICTED PAYMENT" means (a) any redemption, repurchase or
prepayment or other retirement, prior to the stated maturity thereof or prior to
the due date of any regularly scheduled installment or amortization payment with
respect thereto, of any Indebtedness of a Person (other than the Borrowers'
Obligations, the Borrowers' Obligations in respect of the Domestic Financing and
trade debt), and (b) the payment by any Person of the principal amount of or
interest on any Indebtedness (other than trade debt) owing to an Affiliate of
such Person.
"STANDBY LETTER OF CREDIT" shall mean a Standby Letter of Credit
issued for the account of the Borrowers by the Bank to a designated beneficiary,
which beneficiary shall be entitled to make a drawing thereunder only if ASI
fails to perform all of its obligations with respect to an export purchase
order, upon receipt of an executed Application and Agreement for Standby Letter
of Credit, which Standby Letter of Credit shall be issued subject to the ISP or
the UCP and shall be in form and content satisfactory to the Bank in all
respects.
"SUBORDINATION AGREEMENTS" shall mean, collectively, the
Subordination Agreements described in Schedule 1.1.
"SUBSIDIARY" when used to determine the relationship of a Person
to another Person, means a Person of which an aggregate of 50% or more of the
stock of any class or classes or 50% or more of other ownership interests is
owned of record or beneficially by such other Person or by one or more
Subsidiaries of such other Person or by such other Person and one or more
Subsidiaries of such Person, (i) if the holders of such stock or other ownership
interests (A) are ordinarily, in the absence of contingencies, entitled to vote
for the election of a majority of the directors (or other individuals performing
similar functions) of such Person, even though the right so to vote has been
suspended by the happening of such a contingency, or (B) are entitled, as such
holders, to vote for the election of a majority of the directors (or individuals
performing similar functions) of such Person, whether or not the right so to
vote exists by reason of
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the happening of a contingency, or (ii) in the case of such other ownership
interests, if such ownership interests constitute a majority voting interest.
"TANGIBLE NET WORTH" means, as applied to any Person, the Net
Worth of such Person at the time in question, after deducting therefrom the
amount of all intangible items reflected therein, including all unamortized debt
discount and expense, unamortized research and development expense, unamortized
deferred charges, goodwill, Intellectual Property, unamortized excess cost of
investment in Subsidiaries over equity at dates of acquisition, and all similar
items which should properly be treated as intangibles in accordance with GAAP
PLUS Subordinated Indebtedness.
"TERMINATION DATE" shall mean August 7, 2001 (unless such date is
not a Business Day, in which case the Termination Date shall be the next
succeeding Business Day), unless the Termination Date is otherwise accelerated
in accordance with SECTION 11.2 hereof, or unless the Termination Date is
extended in the sole and absolute discretion of the Bank.
"TERMINATION EVENT" means with respect to any Benefit Plan
subject to Title IV of ERISA, (a) a "Reportable Event" as defined in Section
4043(b) of ERISA, but excluding any such event as to which the provision for 30
days' notice to the PBGC is waived under applicable regulations, (b) the filing
of a notice of intent to terminate a Benefit Plan or the treatment of a Benefit
Plan amendment as a termination under Section 4041 of ERISA, or (c) the
institution of proceedings to terminate a Benefit Plan by the PBGC under Section
4042 of ERISA or the appointment of a trustee to administer any Benefit Plan.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Kansas.
"UCP" shall mean the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500
and any amendments and revisions thereof.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures which
are paid for by a Person other than with the proceeds of Indebtedness for Money
Borrowed (other than the Loans) incurred to finance such Capital Expenditures
and other than those represented by Capitalized Lease Obligations.
"UNFUNDED VESTED ACCRUED BENEFITS" means, with respect to any
Benefit Plan subject to Title IV of ERISA, at any time, the amount (if any) by
which (a) the present value of all vested nonforfeitable benefits under such
Benefit Plan exceeds (b) the fair market value of all Benefit Plan assets
allocable to such benefits, as determined using reasonable actuarial assumptions
and methods as are specified in the Schedule B
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(Actuarial Information) to the most recent Annual Report (Form 5500) filed with
respect to such Benefit )Plan.
"U.S. PERSON" shall mean any Person which is a Governmental
Authority or personal or corporate resident of the United States.
"UTILIZED PORTION OF THE COMMITMENT" shall mean the sum of (a)
all outstanding advances of the Loan, (b) all amounts which have been drawn and
not reimbursed by the beneficiaries of all Letters of Credit, and (c) 25% of all
amounts which are then available to be drawn by the beneficiaries of all Letters
of Credit.
"WARRANTY LETTER OF CREDIT" shall mean a Standby Letter of Credit
which is issued by the Bank to secure the obligations of ASI to guarantee to the
Account Debtor that goods or services will function as intended for a specified
period.
1.2 OTHER REFERENTIAL PROVISIONS.
(a) All terms in this Agreement, the Exhibits and Schedules
hereto shall have the same defined meanings when used in any other Financing
Documents, unless the context shall required otherwise.
(b) Except as otherwise expressly provided herein, all accounting
terms not specifically defined or specified herein shall have the meanings
generally attributed to such terms under GAAP including, without limitation,
applicable statements and interpretations issued by the Financial Accounting
Standards Board and bulletins, opinions, interpretations and statements issued
by the American Institute of Certified Public Accountants or its committees.
(c) All personal pronouns used in this Agreement, whether used in
the masculine, feminine or neuter gender, shall include all other genders, the
singular shall include the plural, and the plural shall include the singular.
(d) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provisions of this Agreement.
(e) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither limit nor
amplify the provisions of this Agreement, and all references in this Agreement
to Articles, Sections, Subsections, paragraphs, clauses, subclauses, Schedules
or Exhibits shall refer to the corresponding Article, Section, Subsection,
paragraph, clause or subclause of, or Schedule or Exhibit attached to, this
Agreement, unless specific reference is made to the articles, sections or other
subdivisions or divisions of, or to schedules or exhibits to, another document
or instrument.
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(f) Each definition of a document in this Agreement shall include
such document as amended, modified, supplemented or restated from time to time
in accordance with the terms of this Agreement.
(g) Except where specifically restricted, reference to a party to
a Financing Document includes that party and its successors and assigns
permitted hereunder or under such Financing Document.
(h) Unless otherwise specifically stated, whenever a time is
referred to in this Agreement or in any other Financing Documents, such time
shall be the local time in Kansas City, Missouri.
(i) Whenever the phrase "to the knowledge of the Borrowers" or
words of similar import relating to the knowledge of the Borrowers are used
herein, such phrase shall mean and refer to (i) the actual knowledge of the
President or chief financial officer or (ii) the knowledge that such officers
would have obtained if they had engaged in good faith in the diligent
performance of their duties, including the making of such reasonable specific
inquiries as may be necessary of the appropriate persons in a good faith attempt
to ascertain the accuracy of the matter to which such phrase relates.
(j) The terms accounts, chattel paper, documents, equipment,
instruments, general intangibles and inventory, as and when used (without being
capitalized) in this Agreement or the Financing Documents, shall have the
meanings given in the UCC.
ARTICLE II
THE LOAN
2.1 ADVANCES OF THE LOAN. Subject to the provisions of this Agreement,
including the satisfaction of the conditions precedent described in ARTICLE VII
hereof, the Bank agrees to make advances of the Loan in Dollars to ASI from time
to time during the Commitment Period, in amounts not to exceed the then
Available Commitment. Advances of the Loan will be made by the Bank either to
fund the reimbursement of drawings under a Letter of Credit which has been
issued pursuant to the Commitment or to fund working capital requirements by
direct deposit to the Borrowers' Account. Advances will be made against the
written request of ASI signed by an Authorized Borrowers' Representative which
will be funded on the same Business Day if received by 1:30 p.m. (prevailing
eastern standard time) or on the next Business Day if received after such time.
In order to fund a Loan advance, the Lender must have received a Borrowing Base
Certificate which shall be current within the last 30 days and all of the
supporting documentation required by Section 8.1(g) of this Agreement. The Bank
will not make any advance of the Loan (other than advances to fund the
reimbursement of drawings
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under a Letter of Credit which has been issued pursuant to the Commitment)
during any period of time in which it has actual knowledge that ASI has no
export purchase orders outstanding.
2.2 REPAYMENT OF ADVANCES OF THE LOAN. Each advance of the Loan, together
with interest thereon, shall be repaid, and may be prepaid, in accordance with
the provisions of the Promissory Note; provided, however, that the Borrowers'
Loan Obligations must be prepaid to the extent that ASI or the Bank receive any
Proceeds of the Export Receivables and Export Inventory. Amounts which are
advanced under the Loan and repaid by the Borrower shall thereafter be available
to be readvanced to ASI under the Loan, in accordance with the terms of this
Agreement, at any time prior to the Termination Date.
ARTICLE III
THE LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT. Subject to the provisions of this
Agreement, including the satisfaction of the conditions precedent described in
ARTICLE VII hereof, the Bank agrees to issue from time to time during the
Commitment Period, Letters of Credit to beneficiaries designated by ASI, in
stated amounts denominated in Dollars, not to exceed the then Available
Commitment. Unless the Borrowers obtain the prior approval of the Bank and
EXIMBANK or unless the Borrowers are obligated to prepay all of their Letter of
Credit Obligations relating to any such Letter of Credit on the day immediately
preceding the Termination Date, (a) no Letter of Credit shall have an Expiry
Date which is later than 12 calendar months from its date of issuance, and (b)
no Letter of Credit which is issued within 60 days of the Termination Date shall
have an Expiry Date after the Termination Date. Letters of Credit will be issued
by the Bank as soon as practicable following receipt of a completed Application
and Agreement for Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit, as appropriate and in either case executed by an
Authorized Borrower Representative. In order to issue a Letter of Credit, the
Bank must have received a Borrowing Base Certificate which shall be current
within the last 30 days and all of the supporting documentation required by
Section 8.1(g) of this Agreement.
Each Application and Agreement for Standby Letter of Credit must be
accompanied by a copy of the export contract bid, the performance or advance
payment under which is to be secured by the related Standby Letter of Credit.
The Bank will not issue any Letter of Credit during any period of time in which
it has actual knowledge that ASI has no export purchase orders outstanding. No
Warranty Letter of Credit may be issued under this Agreement, unless
specifically approved by EXIMBANK.
3.2 REIMBURSEMENT OF DRAWINGS UNDER LETTERS OF CREDIT. The Borrowers'
Letter of Credit Obligations in respect of each Letter of Credit, including
(without
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limitation) the Borrowers' obligation to reimburse the Bank for all drawings
honored under such Letter of Credit, together with any interest thereon, shall
be set forth in the related Application and Agreement for Letter of Credit.
3.3 INCORPORATION OF APPLICATIONS AND AGREEMENTS FOR LETTERS OF CREDIT.
The terms of each Application and Agreement for Letter of Credit are
incorporated herein by reference. To the extent that there is any direct
conflict between the terms of any Application and Agreement for Letter of Credit
and this Agreement, the terms of this Agreement will prevail, except to the
extent of (a) definitions contained in any Application and Agreement for Letter
of Credit or (b) any provision contained in any Application and Agreement for
Letter of Credit which subjects the Letter of Credit issued pursuant thereto to
the UCP or ISP.
3.4 PREPAYMENT OF LETTER OF CREDIT OBLIGATIONS.
(a) Letter of Credit Obligations may be prepaid by the Borrowers,
in whole but not in part for any one Letter of Credit, at any time, without
premium or penalty.
(b) Unless the remaining Collateral Value continues to support
the then outstanding Borrowers' Obligations, the Borrowers' Letter of Credit
Obligations must be prepaid (by the deposit of cash collateral) to the extent
that the ASI or the Bank receive any Proceeds of the Export Receivables and
Export Inventory in excess of the Borrower's Loan Obligations.
(c) Letter of Credit Obligations relating to Letters of Credit
which exceed the parameters of Section 3.1 of this Agreement must be prepaid in
full on the day immediately preceding the Termination Date or required Expiry
Date, as the case may be, as this date may be accelerated in accordance with
SECTION 11.2 hereof or extended in the sole and absolute discretion of the Bank
and EXIMBANK.
(d) In the event of any prepayment of Letter of Credit
Obligations, the Borrower shall not be entitled to (i) a rebate of the amount so
prepaid, unless the Letter of Credit to which such prepayment relates expires
without having been drawn by the beneficiary thereof, or (ii) any interest on
the amount so prepaid.
3.5 LETTER OF CREDIT FEES. The Borrower agrees to pay to the Bank an
issuance fee in the amount of one and one-quarter of one percent PER ANNUM
(1.25%) of the stated amount of each Letter of Credit which is issued by the
Bank pursuant to the terms of this Agreement and the related Application and
Agreement for Letter of Credit. In addition, the Borrowers agree to pay the
amendment and negotiation fees customarily charged by the Bank in connection
with the issuance of its Letters of Credit. As described in SECTION 4.4 of this
Agreement, all percentage-based fees shall be calculated on the basis of a
360-day year applied to actual days elapsed.
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ARTICLE IV
GENERAL CREDIT PROVISIONS
4.1 PAYMENTS.
(a) All payments by the Borrowers under this Agreement and the
other Financing Documents of the Borrowers' Obligations, except as may be
otherwise specifically provided in the Financing Documents, shall be made to the
Bank at its office located at Bank of America, N.A., 1200 One Kansas City Place,
1200 Main Street, Kansas City, Missouri not later than 2:00 P.M., prevailing
time, on the due date for such payment. If any amount payable to the Bank
hereunder by the Borrowers shall not be paid when due or the payment is made in
funds which are not immediately available or any other Event of Default has
occurred and remains in existence, the Borrowers agree to pay to the Bank
interest, to the extent permitted by applicable law, on the entire principal
amount of the Borrowers' Obligations at a rate which is at all times equal to
three percent (3%) PER ANNUM in excess of the then current rate of interest on
the Loan as described in the Promissory Note until such amount shall be paid in
full or until funds are immediately available or other Event of Default is
cured, as the case may be. If any amount payable hereunder shall become due on a
day other than a Business Day, then such due date shall be the next succeeding
Business Day.
(b) All payments to be made hereunder by the Borrowers shall be
made in Dollars, without set-off or counterclaim and free and clear of, and
without deduction for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions, withholdings or
restrictions or conditions of any nature whatsoever now or hereafter imposed,
levied, collected, withheld or assessed against the Borrowers (the "Taxes"). If
any Taxes are imposed and required to be withheld from any such payment, the
Borrowers shall either (i) increase the amount of such payment so that the Bank
will receive a net amount (determined by adding any additional amount payable by
the Borrowers hereunder and then subtracting the amount of all Taxes) equal to
the amount due hereunder, or (ii) pay such Taxes to the appropriate taxing
authority for the account of the Bank, and, as promptly as possible thereafter,
send the Bank an original receipt (or a copy thereof that has been stamped by
the appropriate taxing authority to certify payment) showing payment thereof,
together with such additional documentary evidence as the Bank may from time to
time reasonably require. If the Borrowers fail to perform their obligations to
the Bank under parts (i) or (ii) of the preceding sentence, the Borrowers shall
indemnify the Bank for any such Taxes that are paid by the Bank PLUS all
incremental Taxes, interest or penalties that may become payable as a
consequence of such failure.
4.2 ILLEGALITY. Notwithstanding any other provision of this Agreement, in
the event that it shall become unlawful for the Bank to maintain any aspect of
its
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Commitment as contemplated by this Agreement, the Commitment of the Bank to
extend the Loan or any Letter of Credit so affected shall be cancelled, and the
Borrowers agree to prepay to the Bank, within two (2) Business Days of receipt
of written demand by the Bank, all of the outstanding Borrowers' Obligations to
which that portion of the Commitment which is terminated as a result of
illegality relates. The Bank agrees that it will take such steps as may be
reasonably available to it to avoid or mitigate any illegality, provided that
the taking of such steps shall not in the opinion of the Bank be materially
prejudicial to it.
4.3 INCREASED COSTS. In the event that any change in applicable
law, treaty, regulation or directive, or in the interpretation or application
thereof, or compliance by the Bank with any request (whether or not having
the force of law) of any relevant central bank or other comparable agency,
shall
(a) subject the Bank to any tax of any kind whatsoever (other
than taxes referred to in SECTION 4.1(B) hereof for which the Bank was
reimbursed by the Borrowers pursuant to the terms of that Section) with respect
to this Agreement or any of the other Financing Documents, any portion of the
Loan or the Letters of Credit or of the Borrowers' Obligations with respect
thereto, or any other transactions contemplated hereby or by the terms of any of
the other Financing Documents, or
(b) change the basis of taxation of payments to the Bank of any
portion of the Borrowers' Obligations, fees, commissions or any other amount
payable under this Agreement or under the other Financing Documents (except for
changes in the rate of tax on the overall net income of the Bank), or
(c) impose, modify or deem applicable any reserve, special
deposit or similar requirement against foreign assets held by, or deposits in or
for the account of, or advances or loans by, or acceptances created by, or any
other acquisition of funds by, any office of the Bank, which reserve, special
deposit or similar requirement is applied to assets such as the Loan or
Borrowers' Obligations or any portion thereof, or
(d) increase the amount of capital required or expected to be
maintained by the Bank, or by any corporation controlling the Bank (a "Parent"),
or reduce the rate of return on capital earned by the Bank or any Parent, (as
determined by the Bank or any Parent taking into consideration their internal
policies with respect to capital adequacy and desired return on capital), which
increased capital or reduced rate of return on capital is applied to assets such
as the Loan or the Letters of Credit or Borrowers' Obligations or any portion
thereof, or
(e) impose upon the Bank any other condition with respect to this
Agreement or the transactions contemplated hereby or by the other Financing
Documents, the result of which is to increase the actual cost to the Bank of
making the Loan or issuing the Letters of Credit under this Agreement or the
other Financing
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Documents or to reduce any amount receivable by the Bank under this Agreement or
under the other Financing Documents or to increase the capital or reduce the
rate of return on capital which the Bank, or any Parent is required or expected
to maintain as a result of this Agreement, the other Financing Documents, the
Loan or the Letters of Credit, the Borrowers' Obligations, or any portion
thereof,
THEN the Borrowers shall pay to the Bank within thirty (30) days of a written
demand by the Bank, additional amounts which will compensate the Bank or any
Parent so affected, for such increased cost, reduced amount receivable,
increased capital or reduced return on capital, as the case may be. Each such
demand by the Bank shall be accompanied by a certificate setting forth in
reasonable detail (i) the change that gave rise to such increased cost, reduced
amount receivable, increased capital or reduced rate of return on capital, (ii)
the additional amounts payable pursuant to the foregoing sentence, and (iii) a
calculation of such amount, which certificate shall be conclusive absent
manifest error.
Upon the occurrence of any of the foregoing events, the Borrowers shall
have the option, upon not less than five (5) Business Days' prior written notice
to the Bank, to prepay to the Bank all of the then outstanding Borrowers'
Obligations to which such increased costs relate and all other related sums due
by the Borrowers under the terms of this Agreement and the other Financing
Documents, in which event that portion of the Bank's Commitment so affected
shall immediately be cancelled. In the event that the Borrowers elect to prepay
the Borrowers' Obligations in accordance with the preceding sentence, all
provisions herein and in the other Financing Documents regarding prepayment
shall apply and the Borrowers will still be obligated to pay to the Bank the
additional amounts described by this SECTION 4.3 with respect to all periods in
which the affected Borrowers' Obligations remained outstanding.
4.4 COMPUTATIONS. All computations of interest and fees payable pursuant
to the terms of this Agreement or any of the other Financing Documents shall be
made on the basis of a 360-day year applied to actual days elapsed.
4.5 APPLICATION OF PAYMENTS. All payments (including prepayments) made by
the Borrowers in respect of the Borrowers' Obligations shall be applied by the
Bank FIRST to any unpaid costs, fees and expenses due under this Agreement and
the other Financing Documents, SECOND, to the payment of accrued and unpaid
interest, and FINALLY, to the payment of the principal amount of the Borrowers'
Obligations to which such payment pertains.
Notwithstanding any provision contained herein or in any of the other Financing
Documents, all Proceeds of the Export Receivables and Export Inventory which are
received by ASI or the Bank shall immediately be applied FIRST to the prepayment
of the Borrowers' Loan Obligations and THEN, in the event that any Default or
Event of Default has occurred and is continuing or would be caused by virtue of
the outstanding Borrowers' Obligations with respect to the Utilized Portion of
the Commitment
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exceeding the Collateral Value, to the prepayment (by the deposit of cash
collateral) of the Borrowers' Letter of Credit Obligations, and all other
provisions regarding prepayment which are contained in this Agreement and in the
other Financing Documents shall apply.
4.6 RELIANCE BY BANK ON COMMUNICATIONS AND AUTHORIZATIONS FROM BORROWER.
In making the Loan or in issuing any Letter of Credit pursuant to this Agreement
and the other Financing Documents, the Bank shall be authorized to rely on any
Borrowing Base Certificate, Application and Agreement for Commercial Letter of
Credit, Application and Agreement for Standby Letter of Credit, or other notice
or communication which appears to have been executed and delivered by any one or
more of the authorized officers of ASI who are designated in the certificate
delivered by ASI to the Bank in accordance with Section 7.1(d) hereof (each, an
"Authorized Borrowers' Representative"). In the event that the officer(s)
authorized to deliver such documents or to take action hereunder on behalf of
ASI become unavailable or unable to do so, the President of ASI shall appoint a
successor or successors and shall furnish the Bank with a certificate containing
the specimen signature of each officer so appointed to act on behalf of ASI
pursuant to this Agreement and the other Financing Documents.
4.7 NATURE OF ALL BORROWERS' OBLIGATIONS; RIGHT OF CONTRIBUTION. Whether
or not expressly stated in this Agreement or in the other Financing Documents,
all of the Borrowers' Obligations shall constitute the joint and several
obligations of ASI and DCI.
Each Borrower shall have a right of contribution to obtain reimbursement
from the other Borrower for any payment made by such Borrower in respect of the
Borrowers' Obligations, to the extent that such payment exceeds the benefit
realized by such Borrowers from the Loan and Letters of Credit.
Any right of contribution between Borrowers which arises as a result of
payments made in respect of the Borrowers' Obligations under this Agreement or
any of the other Financing Documents shall be subordinate in all respects to the
Bank's right to receive payment in full of the Borrowers' Obligations.
ARTICLE V
SECURITY
5.1 FINANCING DOCUMENTS. The Borrowers' Obligations to the Bank
in respect of the Loan and the Letters of Credit, if issued, shall be
evidenced and secured by the Financing Documents.
5.2 COLLATERAL. As security and collateral for the repayment of the
Borrowers' Obligations, each Borrower hereby grants to the Bank a lien on and
security interest in all of the Collateral.
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NOTWITHSTANDING THE FOREGOING GRANT BY EACH BORROWER OF A SECURITY
INTEREST IN ALL OF THE COLLATERAL, IT IS UNDERSTOOD AND AGREED BY THE PARTIES
HERETO THAT THE BANK SHALL HAVE AS SECURITY FOR THE BORROWERS' OBLIGATIONS (A) A
FIRST PRIORITY LIEN ON THE COLLATERAL WHICH IS COMPRISED OF EXPORT RECEIVABLES,
EXPORT INVENTORY AND ALL PROCEEDS THEREOF, INCLUDING ALL MONIES ON DEPOSIT FROM
TIME TO TIME IN THE BORROWERS' ACCOUNT AND (B) A SECOND AND SUBORDINATE LIEN ON
ALL OF THE OTHER COLLATERAL WHICH IS THE SUBJECT TO A FIRST PRIORITY LIEN IN
FAVOR OF THE BANK SECURING THE DOMESTIC FINANCING. THIS AGREEMENT AS TO LIEN
PRIORITY SHALL BE BINDING ON ANY SUCCESSORS AND ASSIGNS OF THE PARTIES,
INCLUDING (WITHOUT LIMITATION) EXIMBANK.
The Borrowers further agree that the Bank shall have in respect of the
Collateral all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Kansas and of all other states in which any
portion of the Collateral may be located, as well as those provided in this
Agreement.
5.3 VALUATION OF COLLATERAL. For purposes of determining the amount of the
Available Commitment, from time to time, only eligible Export Receivables and
Export Inventory of ASI have a Collateral Value, as follows:
(a) Export Receivables will be valued at 90% of their outstanding
principal amount from time to time, less the amount of any taxes, discounts,
credits, allowances and retainages; provided that each such Export Receivable
satisfies the following eligibility requirements; provided further, that to the
extent that any Export Receivable fails to satisfy each of the following
eligibility criteria with respect to only a portion of the aggregate amount of
payments due in respect of such Export Receivable, only that portion of the
aggregate amount of payments due which fails to satisfy each of the eligibility
criteria shall be deemed ineligible for purposes of this Agreement:
(i) the repayment obligation represented by the Export
Receivable (A) is related to an export transaction between ASI and the
Account Debtor and (B) either (i) is denominated in United States Dollars,
or (ii) if denominated in a foreign currency, EXIMBANK has given specific
approval for the Bank to attribute Collateral Value to such Receivable
which is denominated in a specifically approved foreign currency, and the
foreign exchange risk is 100% covered by a foreign exchange contract or
other hedging mechanism whether provided by the Bank, another financial
institution or reserved for internally and (C) is due and collectible
within the United States; and
(ii) the Export Receivable arose in the ordinary course of
business from the sale of goods or performance of services; unless
specifically approved in writing by EXIMBANK, the Export-Receivable does
not arise from a transaction which could be characterized as a
bill-and-hold transaction, guaranteed sale, sale-and-return transaction,
sale on approval, consignment or any other
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repurchase or return arrangement and all obligations of ASI which give
rise to the right to receive payment of the Export Receivable (including,
without limitation, shipment of Export Inventory) have been performed in
full, an invoice has been remitted to the Account Debtor and the Account
Debtor has accepted the subject goods or services, such that the Export
Receivable represents a final sale and none of the subject Export
Inventory has been in fact returned, rejected or repossessed; and
(iii) the payment obligation represented by the Export
Receivable (A) has not been outstanding more than (I) sixty (60) calendar
days past the original due date, or (II) ninety (90) calendar days past
the original due date for any Export Receivable which is 100% insured
through EXIMBANK or through an EXIMBANK-approved private insurer for
comprehensive commercial and political risk, or the repayment of which is
100% guaranteed by EXIMBANK, and (III) one hundred and eighty (180)
calendar days past the original invoice date, (B) is not contingent or
conditioned upon any event or subject to any claim of reduction,
counterclaim, setoff, recoupment or other defense to payment, either as a
result of returned, damaged, inferior or nonconforming Export Inventory or
arising out of any other indebtedness of ASI to the Account Debtor, and
(C) otherwise complies with any and all requirements of ASI's credit and
collection policies; and
(iv) the payment obligation represented by the Export
Receivable is not owed by an employee, stockholder of director of ASI, by
a Subsidiary of ASI or any parent corporation or any other corporation
affiliated with ASI by virtue of common ownership, partnership or joint
venture arrangement; and
(v) ASI is sole owner of the Export Receivable and has not
sold, disposed of, or otherwise encumbered its rights to receive payment
under the Export Receivable, and the Export Receivable is not subject to
the lien or security interest of any other Person except for Permitted
Liens; and
(vi) the Export Receivable is included in the universe of
Collateral with respect to which the Bank has filed a financing statement
among all records required by the Uniform Commercial Code of the
jurisdiction in which ASI maintains its principal place of business in
order to properly perfect the Bank's security interest, and the Export
Receivable is not evidenced by Chattel Paper (within the meaning of the
Uniform Commercial Code); and
(vii) as provided in Section 7 of the applicable Loan
Authorization Notice attached to the EXIMBANK Borrower Agreement, either
(A) the payment obligation represented by the Export Receivable is owed to
ASI by one of the Account Debtors whom the Bank has approved for open
account
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terms and is within any maximum limits prescribed for open account terms
with any such Account Debtor, all as set forth on SCHEDULE II attached
hereto and made a part hereof, as the same may be supplemented or amended
from time to time, and ASI has obtained the written acknowledgement from
the Account Debtor that the Export Receivable has been assigned to the
Bank and that all payments made with respect to the Export Receivable will
be made directly to the Borrowers' Account; or (B) the entire amount of
the payment obligation represented by the Export Receivable is secured by
either (I) an irrevocable, United States dollar-denominated, commercial
letter of credit issued or confirmed by a financial institution acceptable
to the Bank, the proceeds of which letter of credit have been assigned to
the Bank or which letter of credit shall specifically provide that payment
thereunder shall be made solely to the Borrowers' Account, or (II) a
Receivables insurance policy issued by EXIMBANK or a private insurance
company acceptable to the Bank and EXIMBANK, in either case, the proceeds
of which policy have been assigned to the Bank or (III) the Account Debtor
has received "end user" financing from EXIMBANK for the payment
obligations represented by the Export Receivable and the proceeds of
EXIMBANK's loan to the Account Debtor are assigned to the Bank as security
for the Borrowers' Obligations; and
(viii) the entire amount of the Export Receivable as
reflected on ASI books and records and on any invoice or statement sent to
the Account Debtor is due and owing to ASI, net of any finance charges or
taxes relating thereto; no partial prepayment has been made with respect
to the Export Receivable except as indicated; and the amount of the Export
Receivable does not represent billings in excess of revenues earned on
contracts in progress, unless such billings represent amounts due for work
not yet performed but billed in accordance with the terms of ASI's
contract with the applicable Account Debtor; and
(ix) the Export Receivable is not due from an Account
Debtor which (A) has applied for, suffered or consented to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or all or a substantial portion of its property or
which has called a meeting of the creditors, (B) has admitted in writing
its inability, or is generally unable, to pay its debts as they become due
or has ceased operation of its present business, (C) has made a general
assignment for the benefit of creditors, (D) has commenced a voluntary
case under any state or federal bankruptcy laws which are now or hereafter
in effect, (E) has been adjudicated as bankrupt or insolvent, (F) has
filed a petition seeking to take advantage of any other law providing for
the relief of debtors, (G) has acquired to, or failed to have dismissed,
any petition which is filed against it in any involuntary case brought
under applicable bankruptcy law, or (H) has taken any action for the
purpose of effecting any of the foregoing; and
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(x) the payment obligation represented by the Export
Receivable is not owed by a Person resident of any country which has been
identified on EXIMBANK's Country Limitation Schedule as either (A) a
country in which EXIMBANK is prohibited from doing business in the public
or private sector (as appropriate), or (B) a country which is not
available in the public or private sector (as appropriate) for EXIMBANK
guaranteed financing due to commercial reasons, unless the payment
obligation represented by the Export Receivable is secured by an
irrevocable letter of credit issued or confirmed by a financial
institution acceptable to EXIMBANK; and
(xi) the payment obligation represented by the Export
Receivable does not result from the sale of Export Inventory for military
defense purposes, and, except as specifically approved by EXIMBANK, the
Account Debtor is not a military entity.
Notwithstanding compliance with the above-described eligibility requirements, no
Export Receivable which the Bank or EXIMBANK, in their reasonable judgment, deem
uncollectible for any reason shall have Collateral Value for purposes of
determining the amount of the Available Commitment from time to time.
(b) Export Inventory will be valued at 75% of the lesser of its
wholesale cost or market value, from time to time, provided that each item of
Export Inventory, including work-in-process, satisfies the following eligibility
requirements and provided further that at no time shall the Collateral Value of
Export Inventory support more than 60% of the outstanding Loan Obligations plus
the aggregate stated amount of Commercial Letters of Credit:
(i) the Export Inventory is held by ASI for
export sale and is located within the United States; and
(ii) the Export Inventory has been purchased,
assembled or manufactured by ASI in the ordinary course of business, but
not for speculative sale, and does not constitute demonstration Export
Inventory or proprietary software (unless incorporated into or made part
of a system), and is actually owned by, and in the possession of, ASI and
not merely in the possession of ASI on a consignment or similar basis, and
the Export Inventory has not been sold or disposed of by ASI and is not
subject to the lien or security interest of any other Person except for
Permitted Liens; and
(iii) the Export Inventory is not considered by ASI or
other corporations which engage in substantially the same business as ASI
to be damaged, defective, unmerchantable, slow moving or obsolete, and has
not been returned by any other purchaser and is not defective, recalled or
unfit for further
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processing and has not been previously sold or exported from the United
States; and
(iv) the Export Inventory is located at an address
which has been disclosed in Section 6.14 of this Agreement or by written
supplement thereto delivered to the Bank and is included in the universe
of Collateral with respect to which the Bank has filed a financing
statement among all records required by the Uniform Commercial Code of the
jurisdiction in which ASI maintains its principal place of business in
order to properly perfect the Bank's security interest, and the Export
Inventory is not evidenced by Chattel Paper (within the meaning of the
Uniform Commercial Code) or any other documents of title; and
(v) the Export Inventory is not in the possession of a
processor or bailee, or located on a premises leased or subleased to ASI
or located on a premises subject to a mortgage in favor of a Person other
than the Bank, unless the processor, bailee, lessor, sublessor or
mortgagee (as the case may be) has executed and delivered all
documentation reasonably required by the Bank to evidence the
subordination or extinguishment of rights to the Collateral and to confirm
the Bank's right to gain access to such premises to exercise any and all
rights against the Collateral; and
(vi) the Export Inventory does not constitute and is
not to be incorporated into any items which are destined for shipment to
any country which has been identified on EXIMBANK's Country Limitation
Schedule as either (A) a country in which EXIMBANK is prohibited from
doing business in the public or private sector (as appropriate), or (B) a
country which is not available in the public or private sector (as
appropriate) for EXIMBANK-guaranteed financing due to commercial reasons,
unless the purchase price of such item of Export Inventory to be sold
within any such country is secured by an irrevocable letter of credit
issued or confirmed by a financial institution acceptable to EXIMBANK; and
(vii) the Export Inventory does not
constitute defense articles or defense services and is not destined to
be purchased for military defense purposes; and
(viii) any Export Inventory which is listed on the
United Munitions List (Art 121 of Title 22 of the Code of Federal
Regulations), unless ASI shall have provided written notice to the Bank
describing such items of Export Inventory and the corresponding invoice
amount for each and EXIMBANK shall have approved such Export Inventory for
financing under the Commitment; and
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(ix) the Export Inventory contains at least
50% U.S. content, which is defined to include all labor, materials and
services which are of United States origin or manufacture and which are
incorporated into an item within the United States; and
(x) the Export Inventory was not produced in violation
of the Fair Labor Standards Act and it not subject to the "hot goods"
provisions contained in 29 UJC ss.215 or any successor statute; AND
(xi) the sale of the Export Inventory will
not result in an ineligible Receivable.
Upon the sale, shipment or other disposition of any item of Export Inventory,
such item of Export Inventory shall cease to have Collateral Value as Export
Inventory; however, the resulting Export Receivable shall have Collateral Value
provided that it otherwise satisfies all of the eligibility criteria for Export
Receivables described above.
No Collateral other than Export Receivables and Export Inventory which
satisfy the eligibility requirements contained in paragraphs (a) and (b) above
shall have a value for purposes of determining the amount of the Available
Commitment from time to time. Any Export Receivable or Export Inventory which
subsequently fails to satisfy any of the eligibility requirements set forth in
this Section shall immediately cease to have any value for purposes of
determining the amount of the Available Commitment from time to time.
For purposes of facilitating compliance by the Borrowers with the
foregoing eligibility requirements, a copy of EXIMBANK's current Country
Limitation Schedule is attached as Schedule I to this Agreement. This Schedule
is revised, amended and updated periodically, and the Bank will endeavor to
provide the Borrowers with copies of any supplements and modifications to the
Country Limitation Schedule which are provided to it by EXIMBANK.
5.4 LOCATION OF COLLATERAL: PRINCIPAL PLACE OF BORROWERS' BUSINESSES: The
Borrowers agree to keep the Bank informed as to the location of the Collateral
and the address of each Borrower's principal place of business, give the Bank
prior notice of any contemplated changes of location or the address of either
Borrower's principal place of business, and not change the location of any of
the Collateral or the address of either Borrower's principal place of business,
without the prior written consent of the Bank. Notwithstanding the foregoing,
with notice to, but without the need for obtaining the consent of the Bank, the
Borrowers may move Collateral among locations where the Bank has filed Financing
Statements to properly perfect its lien in the Collateral.
5.5 LOSS OF COLLATERAL. The Bank shall not be liable for any loss of any
Collateral in its possession unless such loss is directly caused by the gross
negligence or willful misconduct of the Bank. In no event any shall such loss
diminish the debt due.
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5.6 FILING OF FINANCING STATEMENTS: PERFECTION OF SECURITY
INTEREST IN COLLATERAL.
(a) The security interest created by this Agreement shall be
perfected by the filing of financing statements which fully comply with Article
9 of the Uniform Commercial Code, as adopted by each of the states in which the
Collateral may be located, in such offices as may be required by the Bank. The
parties agree that:
(i) with respect to any such financing statement, a
carbon, photographic or other reproduction of a security agreement or a
financing statement is sufficient as a financing statement for purposes of
Section 9-402 of the Uniform Commercial Code;
(ii) all necessary continuation statements shall be
filed by the secured party or its assigns named therein within the time
prescribed by Article 9 of the Uniform Commercial Code, as adopted by each
of the states in which the Collateral may be located, in order to continue
the perfection of the security interests created by this Agreement;
(iii) if at any time any of the information contained
in any financing statement filed in connection with the security interests
created by this Agreement, including without limitation, the location or
description of the Collateral or the name, address or principal place of
business of either Borrower, shall change in such manner as to cause such
financing statement to become misleading in any material respect or as may
impair the perfection of the security interests intended to be created by
this Agreement, then the Borrowers shall promptly prepare an amendment to
such financing statement as may be necessary to continue the perfection of
the security interest intended to be created by this Agreement and file
the same in any office where such amendment is required to be filed to
continue the perfection of the security interests created by this
Agreement;
(iv) upon the request of the Bank, the Borrowers shall
prepare, have executed and file any amendments to the financing statements
filed with respect to the security interests created by this Agreement in
such form as the Bank may require; and
(v) the Borrowers shall bear all costs of
any and all of the filings described in this SECTION 5.6, including any
recordation taxes payable as a result of such filings; and
(vi) upon request by the Bank or EXIMBANK, the
Borrowers shall provide, at their expense, an opinion of counsel as to the
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effectiveness and perfection of the Bank's lien on the Collateral or any
portion thereof.
(b) To the extent deemed necessary or appropriate by the Bank,
the security interest created by this Agreement in any items of Collateral, for
which the UCC requires possession in order to perfect the Bank's lien in such
item of Collateral, shall be perfected by the delivery to the Bank or, with the
Bank's consent, to agents, branches, affiliates, correspondents or others acting
on behalf of the Bank, of all such Collateral as security for the Borrowers'
Obligations.
(c) The security interest created by this Agreement in any
Receivable which is owed to either Borrower by any state or political
subdivision thereof or by the United States or any department, agency or
instrumentality thereof, shall be further perfected by such Borrower's execution
and delivery to the Bank of any instruments, the giving of any notices, and the
taking of any additional steps which may be required by the Federal Assignment
of Claims Act, the Federal Assignment of Contracts Act or any equivalent
provision of state or local law in order to ensure the effectiveness of the
assignment of such Receivable against the account debtor.
(d) The security interest created by this Agreement in any
unsecured Export Receivable shall be further perfected by the execution and
delivery to the Bank of any instruments and the giving of any notices and the
taking of any additional steps which may be required under foreign law in order
to ensure the effectiveness of the assignment of such Export Receivable against
the Account Debtor.
5.7 ASSIGNMENT OF LETTER OF CREDIT PROCEEDS.
(a) The Borrowers shall require that each letter of credit issued
for its benefit with respect to any Export Receivable or Export Inventory shall
provide that one of the required documents for the first payment under the
letter of credit shall be a copy of an assignment of proceeds executed by such
Borrower as beneficiary of the letter of credit in favor of the Bank; said
assignment shall be for the full amount of the letter of credit, and shall
provide that all payments under the letter of credit shall be made directly to
the Borrowers' Account.
(b) The Borrowers will take all necessary and advisable steps to
ensure that each letter of credit described in paragraph (a) above will either
(i) be delivered to the paying or confirming bank and that said paying or
confirming bank shall be authorized to retain the letter of credit on behalf of
the Bank as the assignee of the proceeds thereof, or (ii) be retained by such
Borrower, if no paying or confirming bank has been designated.
(c) In order to perfect the Bank's assignment of the proceeds of
the letters of credit issued for such Borrower's benefit, each Borrower agrees
to act as the
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agent of the Bank for the purposes of (i) accepting delivery of all such letters
of credit, and (ii) holding such letters of credit for the benefit of the Bank
until such time as the letters of credit are delivered to the paying or
confirming bank in accordance with paragraph (b) above.
(d) In the event that either Borrower is unable to obtain the
assignment of the letter of credit in accordance with paragraph (a) above, such
Borrower shall be required to arrange in writing (with a copy to the Bank) with
the account party under any such letter of credit that the issuer of said letter
of credit include therein a provision to the effect that payment under said
letter of credit shall be negotiated only at the Bank's counters or,
alternatively, that payment shall be made only to the Borrowers' Account.
5.8 ASSIGNMENT OF CONTRACT/PURCHASE ORDER PROCEEDS. The Borrowers shall
assign to the Bank, immediately after the execution of a contract of sale with
an importer or receipt of a purchase order from an importer, all amounts to be
paid to such Borrower under that contract or purchase order. Said assignment
shall provide that all of said payments shall be made directly to the Borrowers'
Account.
5.9 ASSIGNMENT OF FOREIGN CREDIT INSURANCE POLICY PROCEEDS AND
BUYER/SUPPLIER FINANCING. The Borrowers shall, simultaneously with the execution
of this Agreement and as and when such policies are put into effect or financing
is obtained by either Borrower for the benefit of any Account Debtor, at any
time prior to the payment and performance in full of the Borrowers' Obligations,
assign to the Bank the proceeds of all foreign credit insurance policies
maintained by such Borrower and any financing obtained by such Borrower for the
benefit of any Account Debtor, including (without limitation) financing the
repayment of which is guaranteed by EXIMBANK, such assignment to provide for
payment to be made directly into the Borrowers' Account.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Loan and Letters of Credit available to or
for the account of the benefit of ASI pursuant to this Agreement and the other
Financing Documents, and to induce EXIMBANK to issue the EXIMBANK Guarantee,
each Borrower represents and warrants to the Bank and EXIMBANK, as follows, each
of such representations and warranties to be reconfirmed by each Borrower at the
time each Borrowing Base Certificate, Application and Agreement for Commercial
Letter of Credit and Application and Agreement for Standby Letter of Credit is
submitted to the Bank and at the time the Bank receives any request from ASI for
any advance of the Loan, it being the affirmative obligation of the Borrowers to
notify the Bank and EXIMBANK in writing of any facts which would in any way
affect its ability to make the representations contained in this Article VI at
any subsequent date:
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6.1 SUBSIDIARIES. The Borrower has no Subsidiaries except those
set forth on Schedule 6.1.
6.2 GOOD STANDING. The Borrower (a) is a corporation duly organized and
existing, in good standing, under the laws of the jurisdiction of its
incorporation, (b) has the corporate power to own its property and to carry on
its business as now being conducted, and (c) is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary, except where failure to be so qualified would not
have a Material Adverse Effect.
6.3 CORPORATE AUTHORITY. The Borrower has full corporate power and
authority to enter into and execute and deliver this Agreement and each of the
other Financing Documents executed and delivered by the Borrower, and to incur
and perform the Borrowers' Obligations provided for herein and therein, all of
which have been duly authorized by all proper and necessary corporate action and
all material governmental licenses, authorizations, consents and approvals
required. No consent or approval of stockholders or of any other person or
public authority or regulatory body is required as a condition to the validity
or enforceability of this Agreement or any of the other Financing Documents, or
if required the same has been duly obtained.
6.4 BINDING OBLIGATIONS. This Agreement and each of the other Financing
Documents executed and delivered by the Borrower have been properly executed by
the Borrower, constitute valid and legally binding obligations of the Borrower,
and are fully enforceable against the Borrower in accordance with their
respective terms, except as enforceability may be limited by laws relating to
bankruptcy, insolvency and other claims effecting creditors' rights generally
and by general equitable principles.
6.5 LITIGATION. There is no litigation or proceeding pending or, so far as
the Borrower knows, threatened before any court or administrative agency which,
in the opinion of the officers of the Borrower, will materially adversely affect
the financial condition or operations of the Borrower, or the ability of the
Borrower to pay and perform in full the Borrowers' Obligations or the authority
of the Borrower to enter into, or the validity or enforceability of, this
Agreement or any of the other Financing Documents executed and delivered by the
Borrower.
6.6 NO CONFLICTING AGREEMENTS. There is (a) no charter, by-law or
preference stock provision of the Borrower and no provision of any existing
contract or agreement binding on the Borrower or affecting its property, and (b)
to the knowledge of the Borrower, no law binding upon the Borrower or affecting
any of its property, which would conflict with or in any way prevent the
execution, delivery or performance of the terms of this Agreement or of any of
the other Financing Documents executed and
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delivered by the Borrower, or which would be in default or violated as a result
of such execution, delivery or performance.
6.7 FINANCIAL CONDITION. The audited balance sheet of ASI as of April 30,
1999, and the unaudited balance sheets of DCI as of December 31, 1998, and the
related statements of income, cash flow and retained earnings for the periods
then ended, together with the unaudited interim balance sheet of ASI as of
December 31, 1999, and the unaudited interim balance sheet of DCI as of November
30, 1999, all heretofore delivered to the Bank, are complete and correct and
fairly present the financial position of the relevant Borrower and the results
of its operations and transactions in its surplus account(s) as of the dates and
for the periods referred to and have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
throughout the period involved. There are no liabilities (of the type required
to be reflected on balance sheets prepared in accordance with generally accepted
accounting principles), direct or indirect, fixed or contingent, of the Borrower
as of the date of such balance sheet which are not reflected therein or in the
notes thereto. There has been no material adverse change in the financial
condition or operations of the Borrower since the date of such balance sheet
(and to the Borrower's knowledge no such material adverse change is pending or
threatened), and the Borrower has not guaranteed the obligations of, or made any
investment in or loans to, any person except as disclosed in such balance
sheets. The Borrower has good and marketable title to all of its properties and
assets, and all of such properties and assets are free and clear of
encumbrances, except as reflected on such balance sheets or in the notes
thereto. The Borrower has incurred no indebtedness, whether primary or
contingent, which is not reflected on its balance sheets or in the notes
thereto.
6.8 FULL DISCLOSURE. Neither the financial statements referred to in
SECTION 6.7 nor any of the Financing Documents, nor any certificate or statement
furnished by the Borrower in connection with the Financing Documents, contains
any untrue statement of a material fact or, when such financial statements,
Financing Documents, statements, reports and certificates are taken in their
entirety, omit to state a material fact necessary to make the statements
contained therein or herein not misleading as of the date hereof. There is no
fact known to the Borrower or which should be known to the Borrower which the
Borrower has not disclosed to the Bank in writing prior to the date of this
Agreement with respect to the transactions contemplated by the Financing
Documents, has, or in the future could, in the reasonable opinion of the
Borrower, have a Material Adverse Effect; provided, however, that no
representation is made as to the retrospective accuracy of any pro formas,
projections or forecasts (except that no information used as a basis for such
pro formas, projections or forecasts shall be knowingly or reasonably believed
by the Borrowers to be inaccurate when used).
6.9 TAX RETURNS. The Borrower has filed or caused to be filed all required
federal, state and local tax returns and has paid all taxes as shown on such
returns to the extent that such taxes have become due. No claims have been
assessed and are unpaid
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with respect to such taxes except as shown in the financial statements referred
to in Section 6.7 above, and the Borrower has established reserves which it
believes to be adequate for the payment of additional taxes for years which have
not been audited by the respective tax authorities.
6.10 COMPLIANCE WITH LAWS GENERALLY. The Borrower is not in violation of
any law, ordinance, governmental rule or regulation to which the Borrower is
subject (including, without limitation, any laws relating to employment
practices or to environmental, occupational and health standards and controls)
and the violation of which would have a Material Adverse Effect, and the
Borrower has obtained any and all licenses, permits, franchises and other
governmental authorizations necessary for the ownership and operation of its
properties and business except where failure to obtain any of the foregoing
would not have a Material Adverse Effect.
6.11 LICENSES. All necessary licenses, permits and authorizations required
for the exporting of the Export Inventory have been or will timely be obtained
by the Borrower, and to the best of Borrower's knowledge, all required necessary
licenses, permits, and authorizations have been or will be timely obtained by
each importer.
6.12 LIENS ON COLLATERAL. The Collateral is free and clear of
Liens except for Permitted Liens.
6.13 BORROWER'S NAME. During the past five (5) years the Borrower
has never done business under any other name.
6.14 PRINCIPAL PLACE OF BUSINESS. The principal place of business of ASI,
within the meaning of the UCC, and the office in which it keeps all of its
records concerning its Receivables and Inventory is set forth on Schedule 6.14.
ASI has maintained its principal place of business at the above-described
location for a period of at least the four (4) months immediately preceding the
Effective Date. ASI maintains only those additional places of business: set
forth on Schedule 6.14.
The principal place of business of DCI, within the meaning of the UCC, and
the office in which it keeps all of its records concerning its Receivables and
Inventory is set forth on Schedule 6.14. DCI has maintained its principal place
of business at the above-described location for a period of at least the four
(4) months immediately preceding the Effective Date. DCI maintains only those
additional places of business set forth on Schedule 6.14.
6.15 MARGIN STOCK. None of the proceeds of any of the Loan or the Letters
of Credit will be used, directly or indirectly, by ASI for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" or "margin stock" within the meaning of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve
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System (herein called "margin security" and "margin stock") or for any other
purpose which might make the transactions contemplated herein a "purpose credit"
within the meaning of said Regulation G or Regulation U, or cause this Agreement
to violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
6.16 ERISA. Neither the Borrower nor any Related Company maintains or
contributes to any Benefit Plan other than those listed on Schedule 6.16. Each
Benefit Plan is in compliance with ERISA in all material respects, and neither
the Borrower nor any Related Company has received any notice asserting that a
Benefit Plan is not in compliance with ERISA. No material liability to the PBGC
or to a Multiemployer Plan has been, or is expected by the Borrower to be,
incurred by the Borrower or any Related Company.
6.17 GOVERNMENTAL CONSENTS. Neither the nature of the Borrower's business
or properties, nor any relationship between the Borrower and any other entity or
person, nor any circumstance in connection with the extension of the Loan or the
issuance of the Letters of Credit is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority, on the part of the Borrower, as a condition to the
execution and delivery of this Agreement or any of the other Financing
Documents.
6.18 SUSPENSION AND DEBARMENT, ETC. Neither the Borrower nor its
Principals (as defined below) are (a) debarred, suspended, proposed for
debarment with a final determination still pending, declared ineligible or
voluntarily excluded (as such terms are defined under any of the Debarment
Regulations referred to below) from participating in procurement or
nonprocurement transactions with any United States federal government department
or agency pursuant to any of the Debarment Regulations (as defined below) or (b)
indicted, convicted or had a civil judgment rendered against them for any of the
offenses listed in any of the Debarment Regulations. For the purposes hereof,
(i) "Principals" shall mean any officer, director, owner, partner, key employee,
or other Person with primary management or supervisory responsibilities with
respect to the Borrower; or any other person (whether or not an employee) who
has critical influence on or substantive control over the transaction covered by
this Agreement; and (ii) the Debarment Regulations shall mean (x) the
Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common
Rule), 53 Fed. Reg. 19204 (May 26, 1988), (y) Subpart 9.4 (Debarment,
Suspension, and Ineligibility) of the Federal Acquisition Regulations, 48
C.F.R., 9.400-9.409 and (z) the revised Governmentwide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 60 Fed. Reg. 33037 (June 26, 1995).
6.19 NO DEFAULT OR EVENT OF DEFAULT. No condition exists which (with
notice or the passage of time or both) would constitute a Default or an Event of
Default under
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this Agreement or any of the other Financing Documents. The Borrower is not in
default under the terms of any other material agreement or material instrument
to which the Borrower is a party or by which any of the Collateral is bound or
subject.
ARTICLE VII
CONDITIONS PRECEDENT AND SUBSEQUENT
7.1 CONDITIONS PRECEDENT. The obligation of the Bank to make
advances under the Loan or to issue any Letters of Credit is subject to
satisfaction of the following conditions precedent:
(a) RECEIPT AND APPROVAL OF DOCUMENTS REQUIRED BY BANK COMMITMENT
LETTER. All of the documents required by the Bank Commitment Letter shall have
been received and approved by the Bank and its counsel, and the Bank shall be
satisfied that the Borrowers have otherwise complied with all of the terms and
conditions of the Bank Commitment Letter.
(b) APPROVAL OF COUNSEL. All legal matters incident to the Loan
and the Letters of Credit and all documents necessary in the opinion of the Bank
to the making of the Loan and the issuance of the Letters of Credit shall be
satisfactory in all respects to counsel for the Bank.
(c) COMPLIANCE. As of the date of the execution and delivery of
this Agreement, (i) the Borrowers shall have complied with, and shall then be in
compliance with, all the terms, covenants, and conditions of this Agreement and
in the other Financing Documents which are binding upon it, (ii) there shall
exist no Default or Event of Default, and (iii) the representations and
warranties contained in ARTICLE VI hereof shall be true and correct in all
material respects.
(d) SUPPORTING DOCUMENTS. The Bank shall have received a
certificate of the Secretary of each Borrower, dated the date of the execution
and delivery of this Agreement, certifying (i) that attached thereto is a true,
complete and correct copy of the Articles of Incorporation of such Borrower as
in effect on the date of such certification and a true, complete and correct
copy of the By-Laws of such Borrower, (ii) that attached thereto is a true,
complete and correct copy of resolutions adopted by the Board of Directors of
such Borrower authorizing the execution and delivery of this Agreement and each
of the other Financing Documents and authorizing the Borrower to incur the
Borrowers' Obligations and to perform all other covenants and agreements
contained in this Agreement and in the other Financing Documents, and (iii) as
to the incumbency and specimen signature of each officer of the Borrower who is
authorized to execute and deliver this Agreement, including all Borrowing Base
Certificates, Applications and Agreements for Commercial Letters of Credit and
Applications and
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Agreements for Standby Letters of Credit to be delivered pursuant hereto, and
any other Financing Documents and all other closing papers executed and
delivered hereunder.
(e) INSURANCE. The Bank shall have received satisfactory evidence
that the insurance which the Borrowers are required by SECTION 8.3 of this
Agreement to maintain is in full force and effect.
(f) LANDLORD'S WAIVER LETTERS. The Borrowers shall have provided
to the Bank letters in form and content satisfactory to the Bank from any
processor, bailee, lessor, sublessor or mortgagee with respect to any premises
on which Export Inventory may be located which subordinates or extinguishes
rights to the Collateral and confirms the Bank's right to gain access to such
premises to exercise any and all rights against the Collateral.
(g) FEES AND EXPENSES. The Borrower shall have paid any of the
fees and expenses described in SECTION 12.3 hereof which are due and payable on
the date of this Agreement.
7.2 CONDITIONS SUBSEQUENT. The following condition must be satisfied
within the time periods specified as conditions to the obligation of the Bank to
continue to make advances under the Loan and to issue Letters of Credit. In
order to satisfy the requirements of EXIMBANK, the Bank must conduct, at the
Borrowers' expense, a post closing lien search to confirm that the UCC Financing
Statements described in SECTION 5.6(A) of this Agreement have been filed among
all appropriate records.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until payment and performance in full of the Borrowers' Obligations, the
Borrowers will perform each of the covenants contained in this ARTICLE VIII:
8.1 FINANCIAL STATEMENTS. The Borrowers shall provide to the Bank the
following financial information, all of which must contain detail reasonably
satisfactory to the Bank. All financial statements shall be complete and correct
in all material respects and the financial statements referred to in clauses (a)
and (b) shall be prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and shall be prepared on a
consolidating basis:
(a) as soon as available but in no event more than 90 days after
the end of each fiscal year of ASI, copies of signed federal income tax returns
for the previous fiscal year and balance sheets of ASI and its Subsidiaries
(including DCI) as of the close of such period and the related statements of
income, shareholders' equity and cash flow for such fiscal year, all on a
consolidating basis, in each case setting forth in
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comparative form the related figures for the previous year and reported on,
without qualification, by Ernst & Young LLP or such other independent certified
public accountants selected by the Borrowers and acceptable to the Bank; and
(b) as soon as available but in no event more than 30 days after
the end of each accounting month of ASI, unaudited balance sheets of ASI as of
the close of such month and the related unaudited income statement for such
month and for the portion of the fiscal year through such month, all on a
consolidating basis, certified by the chief financial officer of ASI to the best
of his knowledge as presenting fairly the financial condition and results of
operations of the Borrowers as of the date thereof and for the periods ended on
such date, subject to normal year end adjustments; and
(c) Within thirty (30) days after the written request of the
Bank, forecasted financial statements prepared by the Borrowers, consisting of
balance sheets, cash flow statements and income statements of the Borrowers,
reflecting projected borrowings under this Agreement and under the Domestic
Financing and setting forth the assumptions on which such forecasted financial
statements were prepared, covering the one-year period until the next fiscal
year end. Projected financial statements must reflect the good faith projections
of the Borrowers based upon reasonable assumptions of the Borrowers; provided,
however, that with respect to the accuracy of pro formas, projections or
forecasts required hereunder, the Borrowers covenant only that information used
as a basis for such pro formas, projections or forecasts shall be knowingly or
reasonably believed by the Borrowers to be true and correct when used, and that
such pro formas, projections and forecasts represent the good faith belief of
the Borrowers that they were accurate when made.
(d) Together with each delivery of financial statements by
Section 8.1(a), a certificate of the accountants who performed the audit in
connection with such statements (a) stating that they have reviewed this
Agreement and that, in making the audit necessary to the issuance of a report on
such financial statements, they have obtained no knowledge of any Default or
Event of Default or, if such accountants have obtained knowledge of a Default or
Event of Default, specifying the nature and period of existence thereof, and (b)
setting forth the calculations necessary to establish whether or not the
Borrowers were in compliance with the covenants contained in Article IX and
Section 10.2 of this Agreement as of the date of such statements.
The Borrowers authorize the Bank, after notice to the Borrowers,
to discuss the financial condition of the Borrowers with the Borrowers'
independent certified public accountants and agrees that such discussion or
communication shall be without liability to either the Bank or the Borrowers'
independent certified public accountants. The Borrowers shall deliver a letter
addressed to such accountants authorizing them to comply with the provisions of
this clause (d). Notice by the Bank to the Borrowers under this paragraph may be
given by telephone.
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(e) Together with each delivery of financial statements required
by Section 8.1(a) and (b), a certificate of the President or chief financial
officer of ASI, in a form satisfactory to Bank in its sole discretion, (a)
stating that, based on an examination sufficient to enable him to make an
informed statement, no Default or Event of Default exists or, if such is not the
case, specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the Borrowers
with respect to such Default or Event of Default, (b) setting forth the
calculations necessary to establish whether or not the Borrowers were in
compliance with the covenants contained in Article IX and Section 10.2 of this
Agreement as of the date of such statements and (c) containing other information
reasonably required by Bank to support Borrowers' calculations on the Borrowing
Base Certificate including, but not limited to Accounts Receivable aging and
Inventory listings.
(f) (i) Promptly upon receipt thereof, copies of all reports, if
any, submitted to either Borrower or its Board of Directors by its independent
public accountants, including, without limitation, all management reports.
(ii) From time to time and promptly upon each request,
such forecasts, data, certificates, reports, statements, opinions of counsel,
documents or further information regarding the business, assets, liabilities,
financial condition, results of operations or business prospects of the
Borrowers as the Bank may reasonably request. The rights of the Bank under this
clause (f)(ii) are in addition to and not in derogation of its rights under any
other provision of this Agreement or any of the other Financing Documents.
(iii) If requested by the Bank, statements in
conformity with the requirements of Federal Reserve Form G-1 or U-1 referred to
in Regulations G and U, respectively, of the Board of Governors of the Federal
Reserve System.
(g) whenever requested by the Bank or EXIMBANK, but in any event
no less frequently than once per calendar month, within 20 days after the end of
the previous month (i) reports with respect to the Export Receivables and Export
Inventory, which reports shall include (without limitation) customer name,
jurisdiction of customer's residence, destination of shipment, dollar amount and
number of days outstanding for each Account Receivable and location of each item
of Inventory and information concerning the status of completion of export
purchase orders, and (ii) a Borrowing Base Certificate that includes Export
Receivables and Export Inventory balances which are reconciled directly to the
month-end Receivables and Inventory aging report and to the general ledger of
ASI, and (iii) summaries of purchase orders or invoices, against which Loan
advances have been made or Letters of Credit issued, together with copies of all
documentation pursuant to which the account debtor's obligations in respect of
the purchase orders or invoices are secured, if appropriate; and
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(h) such additional information, reports or statements as the
Bank or EXIMBANK may from time to time reasonably request.
8.2 TAXES AND CLAIMS. The Borrowers shall pay and discharge all taxes and
assessments whether general or special, ordinary or extraordinary, due and owing
by the Borrowers to all Governmental Authorities in respect of the Borrowers,
any of their respective properties or assets, franchises, businesses, income or
profits, prior to the date on which penalties attach thereto, and all lawful
claims which, if unpaid, might become a lien or encumbrance upon any of its
properties. The Borrowers may, however, defer payment of any contested taxes;
provided that the Borrowers (a) in good failure contest the obligation to pay
such taxes by appropriate proceedings promptly and diligently instituted and
conducted; (b) notify the Bank in writing of the commencement of, and any
material development in, the proceedings; (c) post a bond or takes any other
steps required to keep the contested taxes from becoming a lien on any of the
Collateral; and (d) maintain an adequate reserve for contested taxes in
conformity with GAAP.
8.3 INSURANCE. The Borrowers shall provide or cause to be provided to the
Bank, and shall maintain, or cause to be maintained, in full force and effect at
all times prior to the payment and performance in full of the Borrowers'
Obligations, such policies of insurance as are normally maintained by similar
businesses operating in the same vicinity as the Borrowers, which are
underwritten by a company or companies and are in form and amounts satisfactory
to the Bank, including, by way of example and not by way of limitation, at least
the following:
(a) permanent fire and hazard insurance or property damage
insurance covering any real property improvements owned by the Borrowers and all
Equipment and Inventory and other personal property of the Borrowers wherever
located, affording protection against at least loss or damage by fire or other
hazards covered by the standard all-risk "extended coverage" endorsement
(non-reporting form), including vandalism, malicious mischief, marine, overland
or air freight coverage for Inventory in transit and such other risks as shall
be customarily covered with respect to similar property or as the Bank may from
time to time otherwise require, in amounts acceptable to the Bank containing a
standard non-contributing, non-reporting mortgagee or loss payee clause naming
the Bank as mortgagee and loss payee, as its interests may appear and specifying
that "such policy will not be cancelled without 30 days' prior written notice to
the Bank;
(b) public liability and property damage insurance for the
Borrowers to afford protection in amounts acceptable to the Bank together with
an endorsement naming the Bank as an additional insured;
(c) business interruption insurance for the Borrower to afford
protection against such events as are customarily covered by such insurance
issued with respect to businesses similar to that conducted by the Borrowers;
and
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(d) workers' compensation insurance of the Borrowers with
coverage limits in accordance with the requirements of applicable laws or
regulations.
Insurance proceeds shall be applied in accordance with the provisions of the
documents relating to the Domestic Financing; provided, however, that Proceeds
of insurance relating to Export Receivables and Export Inventory and the other
Collateral shall be applied in accordance with the lien priority established
pursuant to Section 5.2 of this Agreement.
8.4 CORPORATE EXISTENCE. The Borrowers shall maintain in good standing
their existence as Kansas corporations qualified to do business in each
jurisdiction in which such qualification is necessary for the conduct of its
business in such jurisdiction except where failure to be so qualified would not
have a Material Adverse Effect.
8.5 MAINTENANCE OF PROPERTIES. The Borrowers shall maintain all of their
respective properties (including inventory and equipment) in good working order,
reasonable wear and tear excepted, and condition and cause replacements and
repairs to be made when necessary for the proper and advantageous conduct of its
business.
8.6 COMPLIANCE WITH LAWS GENERALLY. The Borrowers shall comply with all
applicable laws, ordinances, governmental rules or regulations to which the
Borrowers are or become subject (including, without limitation, any laws
relating to employment practices or to environmental, occupational and health
standards and controls) and the Borrowers will maintain any and all licenses,
permits, franchises and other governmental authorizations necessary for the
ownership and operation of their respective properties and business except where
noncompliance would not have a Material Adverse Effect.
8.7 MAINTENANCE OF LICENSES. ASI will take all steps necessary to maintain
all licenses, permits and authorizations required for the export of Export
Inventory under the purchase orders which constitute the basis for the Export
Receivables against which advances of the Loan are made or Letters of Credit are
issued pursuant to the terms of this Agreement and the other Financing
Documents.
8.8 BOOKS AND RECORDS; INSPECTION. The Borrowers will keep adequate
records and books of account with respect to their businesses, in accordance
with GAAP; and permit the Bank, by its accountants, attorneys, officers or other
agents, to examine such records and books of account and to discuss the affairs,
finances and accounts pertaining thereto with officers of the Borrowers at their
offices at any time during normal business hours. As part of this requirement,
ASI shall be obligated to maintain information supporting the use of each Loan
advance, each Letter of Credit issued hereunder and supporting the satisfaction
of all eligibility requirements by each Export Receivable and item of Export
Inventory to which Collateral Value is attributable under SECTION 5.3 hereof.
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Without limiting the foregoing, ASI acknowledges that the Bank must perform (a)
an audit of its books and records no less frequently than once during every six
(6) months, (b) a quarterly review of a sampling of export purchase orders
selected by the Bank, and representing at least ten percent (10%) of the
aggregate Dollar amount of export purchase orders and at least ten percent (10%)
of the total number of export purchase orders supporting Borrowers' Obligations
outstanding during the past fiscal quarter, and (c) an annual review of the
Commitment which shall be reported in writing to EXIMBANK.
8.9 NOTIFICATION OF CERTAIN EVENTS, EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. The Borrowers shall promptly notify the Bank in writing (a) within
five (5) Business Days of obtaining knowledge of any event of circumstance which
causes or may cause the Bank to consider any Export Receivables or Export
Inventory to be ineligible for purposes of determining Collateral Value and (b)
within fifteen (15) Business Days of obtaining knowledge of the occurrence of
the following (in each case describing in detail satisfactory to the Bank the
nature thereof and the action the Borrower proposes to take with respect
thereto):
(a) any Default or Event of Default under this Agreement or
any of the other Financing Documents;
(b) any notice, claim or demand from any Governmental Authority
which alleges that either Borrower is in violation of any of the terms of, or
has failed to comply with, any applicable order issued pursuant to any federal
or state statute regulating its operation of business, including, but not
limited to, the Occupational Safety and Health Act and the Environmental
Protection Act or any applicable foreign environmental laws;
(c) any debarment, suspension, proposed debarment with a final
determination still pending, declared ineligibility of voluntary exclusion (as
such terms are defined in the Debarment Regulations defined in SECTION 6.18 of
this Agreement) of either Borrower or any of their Principals (as defined in
SECTION 6.18 hereof) from participation in procurement or nonprocurement
transactions with any United States federal government department or agency, or
any indictment, conviction or civil judgment rendered against either Borrower or
any of their Principals for any of the offenses listed in any of the Debarment
Regulations;
(d) the occurrence of any event which the Borrowers reasonably
believe may adversely affect the collectability of any of the Export
Receivables, including (without limitation) the occurrence of an event under any
accounts receivable insurance maintained by the Borrowers with respect to any of
the Export Receivables or the deterioration of the financial condition of any
bank issuing a letter of credit to secure any of the Export Receivables; and
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(e) any other development which could have a Material
Adverse Effect.
8.10 PERFORMANCE OF ALL EXPORT CONTRACTS. ASI shall perform all of its
obligations under all export contracts in accordance with their terms, including
(without limitation) the delivery of the goods required thereby, free and clear
of material defects and prior to or on the deadline specified therein (or the
deadline as extended by mutual agreement of ASI and the customer.
8.11 CONDITIONS PRECEDENT TO RIGHT TO RECEIVE PAYMENT UNDER EXPORT
CONTRACTS. ASI shall, as soon as possible, take all actions reasonably necessary
to entitle ASI to receive any payments due under all export contracts, including
(without limitation) the timely drawing of drafts under any letters of credit
issued for the benefit of ASI in connection therewith and the timely
presentation of any claims under any insurance policy issued by, or financing
guaranteed by, the Export Import Bank of the United States or any other insurer
or guarantor.
8.12 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. The Borrowers shall
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, from time to time, such supplements hereto and such further
instruments as may reasonably be required by the Bank or EXIMBANK for carrying
out the intention of the parties to, or facilitating the performance of, this
Agreement or any of the Financing Documents.
8.13 ERISA. As soon as possible and in any event within 30 days after the
Borrowers know, or have reason to know, that: (a) any Termination Event with
respect to a Benefit Plan has occurred or will occur, (b) the aggregate present
value of the Unfunded Vested Accrued Benefits under all Plans has increased to
an amount in excess of $0, or (c) either Borrower is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
required by reason of its complete or partial withdrawal (as described in
Section 4203 or 4205 of ERISA) from such Multiemployer Plan, a certificate of
the President or the chief financial officer of ASI setting forth the details of
such of the events described in clauses (a) through (c) as applicable and the
action which is proposed to be taken with respect thereto and, simultaneously
with the filing thereof, copies of any notice or filing which may be required by
the PBGC or other agency of the United States government with respect to such of
the event described in clauses (a) through (c) as applicable.
ARTICLE IX
FINANCIAL COVENANTS
Until payment and performance in full of the Borrowers' Obligations, the
Borrowers will comply with each of the financial covenants contained in this
ARTICLE IX,
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all of which shall be calculated on a consolidated basis as to ASI and its
Subsidiaries (including DCI), compliance to be measured quarterly beginning
April 30, 2000 and for the covenants contained in clauses (b), (c), (d) and (e)
tested on a rolling four-quarter average basis:
9.1 FINANCIAL RATIOS.
(a) MINIMUM TANGIBLE NET WORTH. The Borrowers shall not
permit the Tangible Net Worth of the Borrowers at any time to be less than
$7,250,000.
(b) MINIMUM CURRENT RATIO. The Borrowers shall not permit
the Current Ratio of the Borrowers at any time to be less than 1.5 to 1.0.
(c) MAXIMUM FUNDED DEBT RATIO. The Borrowers shall not permit the
Funded Debt Ratio to exceed (i) 4.15:1 from April 30, 2000 through January 30,
2001; and (ii) 3:1 from and after January 31, 2001. In calculating the Funded
Debt Ratio, EBITDA will be rolled up as follows:
(1) For the April 30, 2000 measurement of the Maximum
Funded Debt Ratio, EBITDA will be the sum of (x) $1,080,000 (which represents
the deemed EBITDA of DCI alone for three (3) fiscal quarters) PLUS (y) EBITDA
for ASI alone for the three (3) fiscal quarters immediately preceding the fiscal
quarter beginning February 1, 2000 PLUS (z) the calculated EBITDA for DCI's and
ASI's combined operations for the fiscal quarter beginning February 1, 2000.
(2) For the July 31, 2000 measurement of the Maximum
Funded Debt Ratio, EBITDA will be the sum of (x) $720,000 (which represents the
deemed EBITDA of DCI alone for two (2) fiscal quarters PLUS (y) EBITDA for ASI
alone for the two (2) fiscal quarters immediately preceding the fiscal quarter
beginning February 1, 2000 PLUS (z) the calculated EBITDA for DCI's and ASI's
combined operations for the two (2) fiscal quarters beginning February 1, 2000.
(3) For the October 31, 2000 measurement of the Maximum
Funded Debt Ratio, EBITDA will be the sum of (x) $360,000 (which represents the
deemed EBITDA of DCI alone for one (1) fiscal quarter PLUS (y) EBITDA for ASI
alone for the fiscal quarter immediately preceding the fiscal quarter beginning
February 1, 2000 PLUS (z) the calculated EBITDA for DCI's and ASI's combined
operations for the three (3) fiscal quarters beginning February 1, 2000.
(4) From and after the January 31, 2001 measurement of
the Maximum Funded Debt Ratio, EBITDA will be the calculated EBITDA for DCI's
and ASI's combined operations.
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(d) MAXIMUM LIABILITIES RATIO. The Borrowers shall not
permit the Liabilities Ratio of the Borrowers at any time to exceed 1.95 to 1.
(e) MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrowers
shall not permit the Debt Service Coverage Ratio of the Borrowers at any time
to be less than 1.25:1.
9.2 CAPITAL EXPENDITURES. The Borrowers shall not make or incur
any Capital Expenditures, except that the Borrowers may make or incur Capital
Expenditures in any fiscal year in an amount not to exceed, in the aggregate,
$300,000.
ARTICLE X
NEGATIVE COVENANTS
Until payment and performance in full of all of the Borrowers'
Obligations, without the written consent of the Bank, the Borrower will not fail
to comply with any of the following covenants.
10.1 USE OF LOAN PROCEEDS OR LETTERS OF CREDIT. The Borrowers will not use
the Loan proceeds or the Letters of Credit for any purposes other than to
finance ASI's cost of assembling, manufacturing, producing and exporting
ground-based navigational equipment and airport lighting equipment. Without in
any way limiting the foregoing, the Borrowers will not use the Loan proceeds or
the Letters of Credit to finance any of the following:
(a) servicing or repaying any of the Borrowers'
pre-existing or future indebtedness unrelated to the Commitment, unless
approved by EXIMBANK in writing;
(b) acquiring fixed assets or capital goods for use in the
Borrowers' business;
(c) acquiring, equipping or renting commercial space
outside of the United States;
(d) paying the salaries of non-U.S. citizens or non-U.S.
permanent residents who are located in offices outside the United States;
(e) providing a Warranty Bond or supported by a Retainage
Receivable, unless approved in writing by EXIMBANK;
(f) financing any portion of the cost of any item of Inventory,
which represents non-United States labor, materials or services, unless such
portion is less than
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fifty percent (50%) of the total cost of the item of Inventory and the
non-United States labor, materials or services are incorporated into the item of
Inventory within the United States;
(g) financing articles or services which are (i) directly or
indirectly destined for use by any military organization, (ii) defense articles
or services otherwise designed primarily for military use (regardless of the
native or actual use thereof), or (iii) without EXIMBANK's prior written
consent, financing any items to be used in the construction, alteration,
operation or maintenance of nuclear power, enrichment, reprocessing, research or
heavy water production facilities; OR
(h) financing goods or services destined for shipment to any
country listed on EXIMBANK's Country Limitation Schedule, except as may be
specifically permitted under Section 5.3 hereof.
10.2 BORROWINGS. The Borrowers will not create, incur, assume or suffer to
exist any Indebtedness for Borrowed Money, except for Permitted Indebtedness for
Money Borrowed.
10.3 LIENS ON COLLATERAL; OTHER ASSETS. The Borrowers will not sell,
transfer or otherwise dispose of any portion of the Collateral or create, incur,
assume or suffer to exist any Lien of any kind upon the Collateral, except for
Permitted Liens. Notwithstanding the foregoing, the Borrowers (a) may sell,
transfer or otherwise dispose of worn out or obsolete equipment up to an
aggregate market value of $10,000 during the term of this Agreement upon notice
to the Bank; and (b) may sell the Olathe Property and the Overland Park Property
(as defined in the documents relating to the Domestic Financing) as long as no
Default or Event of Default has occurred and is continuing; provided that, any
proceeds from such sale, transfer or disposition will be applied to the
Borrowers' Obligations or the Borrowers' obligations in respect of the Domestic
Financing in the order determined by the Bank in its sole but reasonable
discretion. Any other such dispositions shall be made only with the prior
written consent of the Bank, which consent shall not be unreasonably withheld,
provided that, the Bank may, in its sole discretion, require the proceeds of
such disposition to be applied to the Borrowers' Obligations or the Borrowers'
obligations in respect of the Domestic Financing in the order determined by the
Bank or to the purchase of replacement Equipment in which the Bank will have the
first perfected security interest.
10.4 MERGER, ACQUISITION, DISSOLUTION OR SALE OF ASSETS. The Borrowers
will NOT (a) enter into any merger or consolidation or dissolution, or (b)
acquire all or substantially all of the assets of any Person, or (c) sell,
lease, or otherwise dispose of any of its non-current assets, as identified in
accordance with GAAP (except assets disposed of in the ordinary course of
business), (d) make any material change in its corporate structure or identity,
or (e) enter into any agreement to do any of the foregoing; it being
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understood that the Bank may withhold its consent to any of the foregoing in its
sole and absolute discretion.
10.5 CHANGE IN NATURE OF BUSINESS. The Borrowers will not make any
material changes in the basic nature of their businesses as conducted on the
date of this Agreement.
10.6 DOING BUSINESS WITH DEBARRED/SUSPENDED PERSONS. The Borrowers will
not knowingly enter into any transactions with any Person who is debarred,
suspended, declared ineligible or voluntarily excluded from participation in
procurement or nonprocurement transactions with any United States federal
government department or agency pursuant to any of the Debarment Regulations (as
defined in SECTION 6.18 of this Agreement).
10.7 GUARANTIES. The Borrowers will not become or remain liable with
respect to any Guaranty of any obligation of any other Person except for
Guarantees of obligations under the Bond Documents (as defined in the documents
relating to the Domestic Financing).
10.8 INVESTMENTS. The Borrowers will not acquire, after the Effective
Date, any Business Unit or Investment or permit any Investment to be
outstanding, other than Permitted Investments.
10.9 RESTRICTED DISTRIBUTIONS AND PAYMENTS, ETC.. The Borrowers shall not
declare or make any Restricted Distribution or Restricted Payment, except that
so long as no Default or Event of Default shall have occurred and be continuing
or would result therefrom, the Borrowers may make payments on the Subordinated
Indebtedness to the extent permitted by the Subordination Agreements or the
other subordination provisions applicable thereto.
10.10 TRANSACTIONS WITH AFFILIATES. The Borrowers shall not effect any
transaction with any Affiliate on a basis less favorable to the applicable
Borrower than would be the case if such transaction had been effected with a
Person not an Affiliate.
10.11 OPERATING LEASES. The Borrowers shall not enter into any lease other
than a Capitalized Lease which would cause the annual payment obligations of the
Borrowers under all leases (other than leases of real property in effect on the
Effective Date (and renewals and substitutions therefor) and Capitalized Leases)
to exceed $25,000 in the aggregate, with the exception of that certain Aircraft
Lease Agreement dated July 11, 1997, by and between ASI and Scope Leasing,
wherein ASI makes lease payments of approximately $42,000 per year.
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10.12 BENEFIT PLANS. The Borrowers shall not permit, or take any action
which would result in, the aggregate present value of the Unfunded Vested
Accrued Benefits under all Benefit Plans of the Borrowers to exceed $0.
10.13 SALES AND LEASEBACKS. The Borrowers shall not enter into any
arrangement with any Person providing for the leasing from such Person of real
or personal property which has been or is to be sold or transferred, directly or
indirectly, by the Borrowers to such Person.
10.14 AMENDMENTS OF OTHER AGREEMENTS. The Borrowers shall not amend in any
way the interest rate or principal amount or schedule of payments of principal
and interest with respect to any Indebtedness (other than the Borrowers'
Obligations and the Borrowers' obligations with respect to the Domestic
Financing) other than to reduce the interest rate or extend the schedule of
payments with respect thereto.
ARTICLE XI
EVENTS OF DEFAULT; REMEDIES
11.1 EVENTS OF DEFAULT. Any one or more of the following events
shall constitute an Event of Default under this Agreement:
(a) FAILURE TO PAY BORROWERS' OBLIGATIONS. The Borrower shall
fail to pay the amount of any of the Borrowers' Obligations (including, without
limitation, any mandatory prepayments of the Borrowers' Obligations from the
Proceeds of the Export Receivables and Export Inventory) as and when the same
are due and payable in accordance with the terms of this Agreement and the other
Financing Documents; provided, however, that it shall not be an Event of Default
under this Section 11.1(a) if the Borrowers shall fail to pay an amount of
interest due hereunder unless and until such failure shall have continued for a
period of 10 calendar days.
(b) BREACH OF REPRESENTATION AND WARRANTIES. Any representation
or warranty made herein or in any of the Financing Documents, or in any report,
certificate, opinion (including any opinion of counsel for the Borrowers),
financial statement or other instrument delivered in connection with this
Agreement or any of the other Financing Documents shall prove to be false or
misleading in any material respect when made.
(c) OTHER DEFAULTS. Either (i) default shall be made in the due
observance or performance of any other term, covenant or agreement contained in
this Agreement or in any of the other Financing Documents, and such default
shall have continued unremedied for a period of thirty (30) days after written
notice thereof shall have been given to the Borrowers by the Bank, or (ii) an
event of default shall occur under any of the other Financing Documents.
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(d) EXIMBANK GUARANTEE. The EXIMBANK Guarantee shall cease to be
in effect for any reason whatsoever without the Bank's prior written consent,
including (without limitation) the Borrowers' failure to pay the EXIMBANK fees,
as required by SECTION 12.13 of this Agreement.
(e) DEFAULT UNDER OTHER INDEBTEDNESS. Default shall be made with
respect to any other evidence of Indebtedness for Borrowed Money of the
Borrowers (i) to the Bank, or (ii) to any other Person in excess of $25,000, if
the effect of such default is to accelerate the maturity of such evidence of
indebtedness or liability or to permit the holder or obligee thereof to cause
any indebtedness to become due prior to its stated maturity, or any such
indebtedness shall not be paid as and when due and payable.
(f) RECEIVER; BANKRUPTCY. Either of the Borrowers shall (i) apply
for or consent to the appointment of a receiver, trustee or liquidator of itself
or any of its property, (ii) admit in writing its inability to pay its debts as
they mature, (iii) make a general assignment for the benefit of creditors, (iv)
be adjudicated as bankrupt or insolvent, or (v) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, or if corporate action shall be taken by
either of the Borrowers for the purposes of effecting any of the foregoing, or
(vi) by any act indicate its consent to, approval or acquiescence in any such
proceeding or the appointment of any receiver of or trustee for either of the
Borrowers or any substantial part of their properties, or suffers any such
receivership, trusteeship or proceeding to continue undischarged for a period of
30 days.
(g) INVOLUNTARY RECEIVER; BANKRUPTCY. An order, judgment or
decree shall be entered, without the application, approval or consent of either
of the Borrowers by any court of competent jurisdiction, approving a petition
seeking reorganization of the Borrowers, or of all or a substantial part of
their assets or appointing a receiver, trustee or liquidator of either of the
Borrowers, and such order, judgment or decree shall continue unstayed and in
effect for a period of 30 days.
(h) LITIGATION; JUDGMENTS. Either (i) any litigation is filed
against a Borrower or any Guarantor which has or could reasonably be expected to
have a Material Adverse Effect and such litigation is not withdrawn or dismissed
within thirty (30) calendar days of the filing thereof, or (ii) any attachment
or other levy against the Export Receivables or Export Inventory remains
unstayed on appeal for a period of 30 days, or (iii) any uninsured judgment in
excess of $50,000, or any attachment or other levy against the property of
either Borrower which exceeds $50,000 in value remains unpaid, unstayed on
appeal, undischarged, unbonded, or undismissed for a period of 30 days.
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(i) EXECUTION; ATTACHMENT. Any execution or attachment shall be
levied against any of the Collateral, and such execution or attachment shall not
be set aside, discharged or stayed within thirty (30) days after the same shall
have been levied.
(j) CHANGE OF CONTROL. ASI shall cease to own, beneficially and
of record, 100% of the outstanding capital stock of DCI or such ownership shall
cease to vest in ASI voting control of DCI.
(k) COLLATERAL VALUE EXCEEDED. Except for Permitted Overadvances,
the outstanding Borrowers' Obligations with respect to the Utilized Portion of
the Commitment shall at any time exceed the Collateral Value, and the Borrowers
shall fail to either reduce such outstanding Borrowers' Obligations or satisfy
the Bank that the Collateral Value should be increased within five (5) Business
Days, after written notice thereof shall have been given to the Borrowers by the
Bank.
(l) LIENS AGAINST COLLATERAL. Any Lien in any of the Collateral
which is granted, or intended by the Financing Documents to be granted, to the
Bank ceases to be a valid, enforceable, perfected, first priority Lien, subject
only to Permitted Liens and a first priority Lien on the Overland Park Property
(as defined in the documents relating to the Domestic Financing) in favor of
Mutual Service Life Insurance Company and a second priority Lien on the Olathe
Property (as defined in the documents relating to the Domestic Financing) in
favor of Johnson County Certified Development Company;
(m) ENFORCEABLE FINANCING DOCUMENTS. Any material
provisions of the Financing Documents ceases to be valid, binding and
enforceable in accordance with its terms; OR
--
(n) EXIMBANK DOCUMENTS. Any Borrower fails to comply with any
provision of the EXIMBANK Borrower Agreement or the Loan Authorization Notice
attached thereto and such failure is not cured within thirty (30) calendar days.
11.2 REMEDIES. NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN
THIS AGREEMENT, UPON THE OCCURRENCE OF A DEFAULT OR ANY EVENT OF DEFAULT OR UPON
RECEIPT BY THE BANK OF ANY NOTICE WHICH THE BORROWERS ARE REQUIRED TO GIVE UNDER
SECTION 8.9 OF THIS AGREEMENT, THE BANK MAY DISCONTINUE MAKING ADVANCES OF THE
LOAN AND ISSUING LETTERS OF CREDIT HEREUNDER IN ITS SOLE AND ABSOLUTE DISCRETION
AND WILL DISCONTINUE MAKING ADVANCES OF THE LOAN AND ISSUING LETTERS OF CREDIT
HEREUNDER IF AND TO THE EXTENT IT IS DIRECTED TO DO SO BY EXIMBANK.
In addition, upon the occurrence of any Event of Default, and in every
such Event of Default and at any time thereafter, unless such Event of Default
shall be cured to the satisfaction of the Bank and EXIMBANK, the Bank may
exercise any one or more of the following remedies.
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(a) ACCELERATE TERMINATION DATE. Accelerate the
Termination Date, whereupon the Commitment shall terminate as of the
accelerated Termination Date.
(b) ACCELERATE THE BORROWERS' OBLIGATIONS. Demand immediate
payment in full of all of the Borrowers' Obligations under this Agreement and
the other Financing Documents, including (without limitation) all accrued and
unpaid interest thereon, whether or not (i) the Loan has become due and payable,
or (ii) the Commercial Letters of Credit or Standby Letters of Credit may remain
outstanding following repayment of the Borrowers' Obligations relating thereto,
whereupon all outstanding Borrowers' Obligations shall become immediately due
and payable without presentment, demand, protest, or any other notice of any
kind, all of which are hereby expressly waived, anything contained in this
Agreement or in the other Financing Documents to the contrary notwithstanding.
(c) At any time after a Default or Event of Default, ("Blocked
Account Event"), upon written notice by the Bank to the Borrowers, the Borrowers
will cause all moneys, checks, notes, drafts and other payments relating to or
constituting proceeds of Receivables, or of any other Collateral, to be
forwarded to a Bank of America Blocked Depository Account (the "Blocked
Account"), in accordance with an account agreement relating thereto which the
Borrowers agree to execute, and in particular the Borrowers will (i) advise each
Account Debtor to address all remittances with respect to amounts payable on
account of any Receivables to such specified Blocked Account, and (ii) stamp all
invoices relating to any such amounts with a legend satisfactory to the Bank
indicating that payment is to be made to the Borrowers via the Blocked Account.
From and after the occurrence of a Blocked Account Event, the Bank may, in its
sole discretion, elect to continue the use of the Blocked Account
notwithstanding that the Default or Event of Default giving rise to the Blocked
Account Event was cured or otherwise waived.
From and after such notice is given to the Borrowers that a
Blocked Account is required, the Borrowers and the Bank shall cause all
collected balances in the Blocked Account to be applied daily (i) on account of
the Borrowers' Obligations and the Borrowers' obligations in respect of the
Domestic Financing, consistent with the lien priorities on Export Receivables,
Export Inventory and the other Collateral in Section 5.2, such credits to be
entered on the first (1st) Business Day following receipt and to be conditioned
upon final payment in cash or solvent credits of the items giving rise to them,
and (ii) with respect to any balance remaining after such application, so long
as no Default or Event of Default has occurred and is continuing, for transfer
to the Borrowers' Account or such other account of the Borrowers as the
Borrowers and the Bank may agree.
Any moneys, checks, notes, drafts or other payments referred to
in this Section which are received by or on behalf of the Borrowers will be held
in trust for the
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Bank and will be delivered to the Bank as promptly as possible in the exact form
received, together with any necessary endorsements.
Unless and until any such notice of a requirement of a Blocked
Account is given by the Bank, all Accounts Receivable may be collected directly
by the Borrowers, provided that such funds are deposited into a Bank of America
commercial account.
(d) LIQUIDATION OF SECURITY INTEREST IN COLLATERAL. Upon the
occurrence of any Event of Default, and at any time during the continuance
thereof, the Bank shall have, in addition to all other rights and remedies, the
remedies of a secured party under the Uniform Commercial Code, or under any
other governing laws, including, without limitation, the right to take
possession of the Collateral (to which the Borrowers hereby specifically
consent), and for that purpose the Bank may, so far as the Borrowers can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the same therefrom. Upon request of the Bank, the Borrowers
shall assemble and make the Collateral available to the Bank at a place to be
designated by the Bank. Unless the Collateral is perishable or threatens to
rapidly decline in value, or is of a type customarily sold on a recognized
market, the Bank shall give the Borrowers at least ten (10) calendar days' prior
notice of the time and place of any public sale or the time after which any
private sale or any other intended disposition is to be made. The Bank may at
any time in its discretion transfer any securities (I.E., stock or bonds) or
other property constituting the Collateral into its own name or that of its
nominee and receive the income thereon and hold the same as collateral for
Borrowers' Obligations or apply it to principal, or interest or other costs,
fees or charges due on, or with respect to, the Borrowers' Obligations. The
Borrowers hereby irrevocably constitute and appoint the Bank as the Borrowers'
true and lawful attorney in fact, with full power of substitution, at the sole
cost and expense of the Borrowers, but for the sole benefit of the Bank, to
convert the Collateral to cash, including without limitation, completing the
manufacturing process of work in process, and the sale (either public or
private) of all or any portion of the Collateral, to enforce collection of the
Collateral, either in its own name or in the name of the Borrowers, compromising
or settling with any Account Debtors and prosecuting, defending, compromising or
releasing any action relating to the Collateral; to receive, open and dispose of
all mail addressed to the Borrowers and to take therefrom any remittances on or
proceeds of the Collateral in which Bank has a security interest; to notify
United States Post Office authorities to change the address for delivery of mail
addressed to the Borrowers to such address as the Bank may designate; to indorse
the name of the Borrowers in favor of the Bank upon any and all checks, drafts,
money orders, notes, acceptances or other instruments of the same or different
nature; to sign and indorse the name of the Borrowers on and to receive as
secured party any of the Collateral, any invoices, schedules of collateral,
freight or express receipts and/or other documents of title of the same or
different nature relating to the Collateral; to sign the name of the Borrowers
on any notice to the Account Debtors or on verification of the Collateral; and
to sign and file or record on behalf of the Borrowers
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any financing or continuation statements or other statements in order to
perfect, keep perfected or protect the Bank's security interest in the
Collateral. The Bank shall not be obliged to do any of the acts or exercise any
of the powers herein above authorized, but if the Bank elects to do any such act
or exercise any such power, it shall not be responsible to the Borrowers except
for the Bank's own willful misconduct or gross negligence. All powers conferred
upon the Bank by this Agreement, being coupled with an interest, shall be
irrevocable as long as any of the Borrowers' Obligations to the Bank shall
remain unpaid.
(e) BORROWERS REMAINS LIABLE FOR DEFICIENCY. The Borrowers
are liable for the entire amount of the Borrowers' Obligations and will
remain responsible for any deficiency in any proceeds realized upon any
liquidation of Collateral.
(f) OTHER RIGHTS AND REMEDIES. In addition to any other rights or
remedies specifically set forth herein, the Bank shall have available to it all
rights and remedies under any of the Financing Documents and any other rights
and remedies afforded to it at law or in equity.
(g) PERFORMANCE BY BANK. If the Borrowers shall fail to pay any
of the Borrowers' Obligations or the Borrowers shall otherwise fail to perform,
observe or comply with any of the conditions, covenants, terms, stipulations or
agreements contained in this Agreement or any of the other Financing Documents
and the same results in an Event of Default hereunder, the Bank, without notice
to or demand upon the Borrowers, and without waiving or releasing any of the
Borrowers' Obligations or any Event of Default, and in addition to any rights or
remedies available to it under any of the other Financing Documents, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of the Borrowers, and may,
to the extent permitted by law, enter upon the premises of the Borrowers for
that purpose and take all such action thereon as the Bank may consider necessary
or appropriate for such purpose. All sums so paid or advanced by the Bank and
all costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred in connection therewith (the "Expense Payments")
together with interest thereon from the date of payment of the advance or the
date on which the expense was incurred until paid in full at the rate of three
percent (3%) per annum in excess of the Prime Rate shall be paid by the
Borrowers to the Bank on demand and shall constitute and become a part of the
Borrowers' Obligations.
(h) NO CONDITIONS PRECEDENT TO EXERCISE OF REMEDIES. The
Borrowers shall not be relieved of any obligation by reason of the failure of
the Bank to comply with any request of the Borrowers or of any other person, to
sell any portion of the Collateral, or otherwise to enforce any provision of the
Financing Documents, or by reason of the release, regardless of consideration,
of all or any part of the Collateral, or other security for the Borrowers'
Obligations, or by reason of any agreement or stipulation between any subsequent
owner of the Collateral or other security for the
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Borrowers' Obligations, or the Bank extending the time of payment or modifying
the terms of the Financing Documents without first having obtained the consent
of the Borrowers; and in the latter event, the Borrowers shall continue to be
liable to make payments according to the terms of any such extension or
modification agreement, unless expressly released and discharged in writing by
the Bank.
(i) REMEDIES CUMULATIVE AND CONCURRENT. No remedy herein
conferred upon or reserved to the Bank is intended to be exclusive of any other
remedies provided for in the Financing Documents, and each and every such remedy
shall be cumulative, and shall be in addition to every other remedy given
hereunder, or under the Financing Documents, or now or hereafter existing at law
or in equity or by statute. Every right, power and remedy given by the Financing
Documents to the Bank shall be concurrent and may be pursued separately,
successively or together against the Borrower or the Collateral or other
security for the Borrowers' Obligations or any part thereof, and every right,
power and remedy given by the Financing Documents may be exercised from time to
time as often as may be deemed expedient by the Bank.
(j) NO WAIVER. No delay or omission of the Bank to exercise any
right, power or remedy accruing upon the happening of an Event of Default shall
impair any such right, power or remedy or shall be construed to be a waiver of
any such Event of Default or any acquiescence therein. No delay or omission on
the part of the Bank to exercise any remedy hereunder, or acceptance by the Bank
of any partial payment on account of the Borrowers' Obligations shall constitute
a waiver of any such Event of Default and each of the remedies herein provided
shall remain continuously available to the Bank.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. All communications between the parties or notices in
connection with this Agreement and any of the other Financing Documents shall be
in writing (unless otherwise specified herein), hand delivered or sent by
registered airmail, postage prepaid, or by telex, telecopy or other electronic
transmission, addressed to the intended recipient at the address therefor set
forth below. All such communications and notices shall be effective upon
delivery. Any party may change its address or other information for notices by
giving notice to the other parties in accordance with the provisions of this
Section.
(a) if to the Borrowers:
Airport Systems International, Inc.
11300 W. 89th Street
Overland Park, Kansas 66214
Attn: Keith S. Cowan, Chief Executive Officer
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Facsimile Transmission No.: 913-492-0870
with a copy to:
Blackwell Sanders Peper Martin LLP
2300 Main Street, Suite 1000
Kansas City, Missouri 64141
Attn: Merry Evans, Esquire
Facsimile Transmission No.: 816-983-8080
(b) if to the Bank:
Bank of America, N.A.
1200 One Kansas City Place
1200 Main Street
Kansas City, Missouri
Attn: Charles Wooten, Vice President
Facsimile Transmission No.: 816-979-7174
with a copy to:
Bryan Cave LLP
3500 One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: Christopher J. Fisher
Facsimile Transmission No.: 816-374-3300
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and
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attn: Cynthia C. Allner
Facsimile Transmission No.: 410-385-3700
(c) if to EXIMBANK:
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, D.C. 20571
Attn: Vice President,
United States Division
12.2 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS; SUBSIDIARIES.
(a) All covenants, agreements, representations and warranties
made herein and in the certificates delivered pursuant hereto shall survive the
making of the Loan and the issuance of any Letters of Credit, and the execution
and delivery to the Bank of this Agreement and all of the other Financing
Documents and shall continue in full force and effect until all of the
Borrowers' Obligations have been paid and performed in full.
(b) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrowers or any of their Subsidiaries which are contained in this
Agreement or in the other Financing Documents shall inure to the benefit of the
successors and assigns of the Bank, including (without limitation) EXIMBANK,
which is a third-party beneficiary of this Agreement and each of the other
Financing Documents to which it is not a direct party. The Bank may assign any
interest that it may have under this Agreement or the other Financing Documents
to any participant or to EXIMBANK, in each case without the prior consent of or
notice to the Borrowers or any other Person. The Borrowers may not assign any
interest that they may have under this Agreement or the other Financing
Documents, including (without limitation) the right to receive the benefit of
the Loan to be extended hereunder or the Letters of Credit to be issued
hereunder, without the prior written consent of the Bank and EXIMBANK. Any
assignment made or attempted by the Borrowers or either of them without the
prior written consent of the Bank and EXIMBANK shall be void and of no effect.
No consent by the Bank and EXIMBANK to an assignment by either Borrower shall
release such Borrower as the party primarily obligated and liable under the
terms of this Agreement unless the Borrower shall be released specifically by
the Bank and EXIMBANK in writing. No consent by the Bank
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and EXIMBANK to an assignment shall be deemed to be a waiver of the requirement
of prior written consent by the Bank and EXIMBANK with respect to each and every
further assignment and as a condition precedent to the effectiveness of such
assignment.
12.3 PAYMENT OF FEES AND EXPENSES.
(a) LEGAL FEES AND EXPENSES. The Borrowers will pay all
out-of-pocket expenses incurred by the Bank in connection with (i) the
preparation and negotiation of this Agreement and the other Financing Documents,
(ii) the making of the Loan and the issuance of the Letters of Credit by the
Bank, (iii) the protection of the Collateral and any other security for the
repayment of the Borrowers' Obligations, and (iv) the enforcement and protection
of the rights of the Bank in connection with this Agreement or any of the other
Financing Documents, including, but not limited to, the fees and disbursements
of Miles & Stockbridge, Baltimore, Maryland, Bryan Cave LLP, Kansas City,
Missouri or other counsel employed by the Bank.
(b) EXIMBANK FACILITY FEE. The Borrower shall be obligated to pay
directly to the Bank the EXIMBANK Facility Fee in the amount of U.S. $90,000 PER
ANNUM, to be prorated for any portion of a 12-month period during which the
Commitment will be outstanding, which is due and payable on the date of this
Agreement and on each anniversary of the date of this Agreement.
(c) UNUSED LINE FEE. In connection with and as consideration for
the Bank's Commitment, the Borrowers shall pay a fee to the Bank, from the
Effective Date until the Termination Date, in an amount equal to one quarter of
one percent (.25%) PER ANNUM of the average daily unused portion of the
Commitment payable quarterly in arrears on the first day of each quarter and on
the date of any permanent reduction in the Commitment.
(d) EARLY TERMINATION FEE. In the event that the Borrowers
terminate this Agreement at any time prior to the Termination Date, the
Borrowers shall pay to the Bank a prepayment fee of (a) two percent (2%) of the
Commitment if such termination occurs on or before the last day of the
eighteenth (18th) month after the Effective Date hereof, or (b) one percent (1%)
of the Commitment if the Termination Date has been extended and such termination
occurs before the new Termination Date but after the eighteenth month after the
Effective Date hereof.
(e) PREPAYMENT FEE. Provided that no Event of Default has
occurred and is continuing or would occur as a result, upon the written request
of the Borrowers, the Bank will permit the Borrowers to permanently reduce the
Commitment ("Permanent Reductions") on the following conditions: (i) all
Permanent Reductions shall be in increments of not less than Two Hundred
Thousand and No/100 Dollars ($200,000); (ii) Permanent Reductions shall not
occur more than once in any thirty (30) day period; (iii) Permanent Reductions
shall not occur more than four (4) times during
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the effectiveness of the Commitment; (iv) Lender shall be under no obligation to
re-lend any amount permanently reduced pursuant to a Permanent Reduction; (v) a
Permanent Reduction may not be made which would cause an overadvance against the
Borrowing Base after giving effect to such Permanent Reduction; (vi) a permanent
Reduction will be evidenced by an amendment to this Agreement, and will not be
effective until acknowledged by the Bank to the Borrowers in writing; (vii) a
Permanent Reduction would be supported by an equity investment into ASI in an
amount greater than or equal to the Permanent Reduction; (viii) the Borrowers
will pay the Permanent Reduction Prepayment Fee (as hereinafter defined) to the
Bank; and (ix) the Borrowers will pay the actual, reasonable costs of the Bank,
including without limitation legal fees and costs, incurred in connection with a
Permanent Reduction. The "Permanent Reduction Prepayment Fee" is equal to (a)
one and one-third percent (1.33%) of the amount of the Permanent Reduction if
such termination occurs on or before the last day of the eighteenth (18th)
months after the Effective Date hereof; or (b) two-thirds of one percent (.67%)
of the amount of the Permanent Reduction if the Termination Date has been
extended and such termination occurs before the new Termination Date but after
the eighteenth month after the Effective Date hereof.
12.4 APPLICABLE LAW; JURISDICTION, CONSENT TO SERVICE OF PROCESS. This
Agreement and all of the other Financing Documents (except where expressly
indicated therein to the contrary) shall be construed in accordance with and
governed by the laws of the State of Missouri except as specifically provided
herein. The Bank and the Borrowers hereby submit to the non-exclusive
jurisdiction of any Missouri court or federal court sitting in Missouri over any
suit, action or proceeding arising out of or relating to this Agreement. Final
judgment in any such suit, action or proceeding brought in any such court shall
be conclusive and binding upon the Borrowers and may be enforced in any court to
the jurisdiction of which the Borrowers are subject, by a suit upon the
judgment.
12.5 WAIVER OF TRIAL BY JURY. Each of the Borrowers and the Bank hereby
waive trial by jury in any action or proceeding to which the Borrowers (or
either of them) and the Bank may be parties, arising out of or in any way
pertaining to this Agreement or any of the other Financing Documents. It is
agreed and understood that this waiver constitutes a waiver of trial by jury of
all claims against all parties to such actions or proceedings, including claims
against parties who are not parties to this Agreement.
This waiver is knowingly, willingly and voluntarily made by each of the
Borrowers and the Bank, and the Borrowers hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers further represent that they have had the opportunity to be represented
in the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
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12.6 MODIFICATIONS. No course of dealing between the Borrowers and the
Bank shall be effective to amend, modify or change any provision of this
Agreement or the other Financing Documents. No modification or waiver of any
provision of this Agreement or of any of the other Financing Documents, nor
consent to any departure by the Borrowers therefrom, shall be effective unless
the same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which it is given. No
notice to or demand on the Borrowers in any case shall entitle the Borrowers to
any other or further notice or demand in the same, similar or other
circumstances.
12.7 NO WAIVER OF RIGHTS BY BANK. Neither any failure nor any delay on the
part of the Bank in exercising any right, power or privilege hereunder or under
this Agreement or any of the other Financing Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right, power or privilege.
12.8 NO LIABILITY OF BANK. Neither the Bank nor EXIMBANK shall be liable
for any act or omission by it pursuant to the provisions of this Agreement, in
the absence of fraud or gross negligence. The Borrowers hereby agree that
neither the Bank nor EXIMBANK shall be chargeable for any negligence, mistake,
act or omission of any accountant, examiner, agency or attorney employed by it
in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any lien or security
interest in the Collateral or any other interest in any security for the
Borrowers' Obligations. Neither the Bank nor EXIMBANK shall incur any liability
to the Borrowers or to any other party in connection with the acts or omissions
of the Bank or EXIMBANK in reliance upon any certificate or other paper believed
by the Bank or EXIMBANK to be genuine or with respect to any other thing which
the Bank or EXIMBANK may do or refrain from doing, unless such act or omission
amounts to fraud or gross negligence.
By accepting or approving anything required to be observed, performed or
fulfilled by the Borrowers or to be given to the Bank or EXIMBANK pursuant to
this Agreement, including, without limitation, any certificate, balance sheet,
statement of profit and loss or other financial statement, survey, receipt,
appraisal or insurance policy, neither the Bank nor EXIMBANK shall be deemed to
have warranted or represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof and any such
acceptance or approval thereof shall not be or constitute any warranty or
representation with respect thereto.
12.9 INDEMNIFICATION. All acts, including any failure to act, relating to
the Collateral and any other security for the Borrowers' Obligations by any
agent, representative or designee of the Bank or EXIMBANK are performed solely
for the benefit of the Bank or EXIMBANK to assure repayment of the Borrowers'
Obligations and are not for the benefit of the Borrowers, or for the benefit of
any other Person,
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including without limitation, purchasers, tenants or other occupants. The
Borrowers agree to indemnify the Bank and EXIMBANK and to hold the Bank and
EXIMBANK harmless against any loss or expense (including reasonable attorneys,
fees) resulting from any and all claims, actions, settlements, or liability for
acts or failure to act in connection with the Collateral and any other security
for the Borrowers' Obligations. In addition to all amounts payable hereunder,
the Borrowers hereby protect, indemnify and hold harmless the Bank and EXIMBANK
from and against, and hereby agrees to defend the Bank and EXIMBANK against, any
and all claims, damages, losses, liabilities, costs or expenses whatsoever which
the Bank and EXIMBANK may, at any time, sustain or incur by reason of or in
consequence of or arising out of the making of the Loan, the issuance of the
Letters of Credit or the issuance of a guaranty of the Borrowers' Obligations,
as the case may be; it being the intention of the parties that this Agreement
shall be construed and applied to protect and indemnify the Bank and EXIMBANK
against any and all risks involved in the transactions contemplated by this
Agreement and the other Financing Documents, all of which risks are hereby
assumed by the Borrowers. The provisions of this Section shall survive the
expiration of this Agreement and the other Financing Documents.
12.10 NO PARTNERSHIP. Nothing contained in this Agreement shall be
construed in a manner to create any relationship among the Borrowers, the Bank
and EXIMBANK other than the relationship of borrowers, lender and credit
enhancement provider, and the Borrowers, the Bank and EXIMBANK shall not be
considered partners or co-venturers for any purpose on account of this
Agreement.
12.11 TIME OF ESSENCE. Time shall be of the essence for each and every
provision of this Agreement of which time is an element.
12.12 ILLEGALITY. If fulfillment of any provision hereof or any
transaction related hereto or to any of the other Financing Documents, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then IPSO FACTO, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof pertaining to
repayment of the Borrowers' Obligations operates or would prospectively operate
to invalidate this Agreement in whole or in part, then such clause or provision
only shall be void, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect; and if such
provision pertains to repayment of the Borrowers' Obligations, then, at the
option of the Bank, all of the Borrowers' Obligations to the Bank shall become
immediately due and payable.
12.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes;
provided, however, that all such counterparts shall together constitute one and
the same instrument.
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12.14 ENTIRE AGREEMENT BY THE PARTIES. This Agreement and the other
Financing Documents constitute the full and complete agreement by the parties
concerning the subject matter to which they pertain and shall not be varied by
any oral agreement or course of dealing by the parties.
12.15 CAPTIONS AND HEADINGS. The captions and headings contained in this
Agreement are included herein for convenience of reference only and shall not be
considered a part hereof and are not in any way intended to limit or enlarge the
terms hereof.
12.16 BORROWERS' OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. All of the
Borrower's Obligations shall be absolute and unconditional, irrespective of any
set-off or counterclaim or the genuineness, validity, priority or enforceability
of this Agreement or any of the other Financing Documents or any other
circumstance which might otherwise constitute a legal or equitable discharge.
12.17 CONTROLLING AGREEMENT. In order to satisfy the requirements of
EXIMBANK relating to the EXIMBANK Guaranty, the Borrowers have executed and the
Bank has acknowledged the EXIMBANK Borrower Agreement of even date herewith in
favor of EXIMBANK. As between the Bank and the Borrowers, the terms of this
Agreement shall control the terms upon which the Commitment has been extended
and the conditions under which Loan advances may be made to the Borrowers and
Letters of Credit may be issued for the account of the Borrowers.
12.18 MO. REV. STAT. SECTION 432.045 NOTICE.
The following notice is given to comply with Mo. Rev. Stat.
Section 432.045:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT THE BORROWERS AND THE BANK FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY THE BORROWERS AND
THE BANK COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES HERETO,
EXCEPT AS THE PARTIES HERETO MAY LATER AGREE IN WRITING TO MODIFY IT.
12.19 K.S.A. 16-117 AND 16-118 NOTICE.
The following notice is given to comply with K.S.A. 16-117 and
16-118.
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THIS IS THE FINAL EXPRESSION OF THE LETTER OF CREDIT, LOAN AND
SECURITY AGREEMENT BETWEEN BORROWERS AND BANK. THIS LETTER OF CREDIT, LOAN AND
SECURITY AGREEMENT CANNOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL CREDIT
AGREEMENT OR OF A CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWERS AND
BANK. THE FOLLOWING SPACE (WHICH THE PARTIES HERETO AGREE IS SUFFICIENT SPACE)
IS PROVIDED FOR THE PLACEMENT OF NONSTANDARD TERMS, IF ANY (IF THERE ARE NO
NONSTANDARD TERMS TO BE ADDED, STATE "NONE"):
______________NONE________________________
__________________________________________
__________________________________________
[SIGNATURES ON NEXT PAGE]
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BY SIGNING BELOW, BORROWERS AND BANK HEREBY AFFIRM THAT THERE IS
NO UNWRITTEN ORAL CREDIT AGREEMENT BETWEEN THEMSELVES WITH RESPECT TO THE
SUBJECT MATTER OF THIS WRITTEN CREDIT AGREEMENT.
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Agreement
to be duly executed, sealed and delivered by their duly authorized officers, all
as of the day and year first above written.
ATTEST/WITNESS: AIRPORT SYSTEMS INTERNATIONAL, INC.
___________________________ By: ___________________________(SEAL)
Name: ________________________,
Title: _______________________
DCI, INC.
WITNESS:
___________________________ By: __________________________(SEAL)
Name: ________________________,
Title: _______________________
WITNESS: BANK OF AMERICA, N.A.
___________________________ By: __________________________(SEAL)
Name: ________________________,
Title: _______________________
65
PRESS RELEASE
Airport Systems International, Inc.
11300 West 89th Street
Overland Park, Kansas 66214
U.S.A. 913-495-2614
Fax: 913-492-0870
Contact: Thomas C. Cargin
Vice President - Finance and Administration
Phone Number: 913-495-2614
AIRPORT SYSTEMS COMPLETES ACQUISITION OF DCI, INC.
KARL GEMPERLI NAMED PRESIDENT OF DCI.
OVERLAND PARK, Kansas (February 8, 2000) Airport Systems International,
Inc. (AMEX: ASY) today announced that it has completed the previously announced
transaction to acquire 100% of the stock of DCI, Inc. and all of the assets of
KHC, LLC, a related entity. The acquisition was completed substantially in
accordance with the terms previously announced. The transaction was financed
through a loan facility from Bank of America. The Company also completed the
previously reported investment from Kansas City Equity Partners to fund its new
strategic direction of diversification into electronic systems and contract
assembly services.
Mr. Keith Cowan, President and Chief Executive Officer also announced
that Mr. Karl Gemperli (35) has joined DCI, Inc. as President of that
subsidiary. Mr. Cowan stated, "We are extremely pleased to have Mr. Gemperli
to lead the growth initiatives at DCI. Karl's extensive background in
manufacturing management makes him ideal for this assignment, and will allow
the rest of Airport Systems' management team to continue to focus on the
expansive set of opportunities in the navigation aids business."
Mr. Cowan continued, "The acquisition of DCI, Inc. represents an important
milestone for Airport Systems. It provides an additional growth path for the
Company and the foundation for future acquisitions in the contract manufacturing
and proprietary electronics products markets. In addition, we anticipate
excellent opportunities for growth in the Airport Systems' navigation aids
business and will continue to aggressively pursue this market."
Airport Systems International, Inc. is a designer and manufacturer of
electronic components, sub-assemblies and systems and a marketer of electronic
contract assembly services. Its aerospace unit designs, manufactures, markets
and installs ground based radio navigation systems (navaids) and airfield
lighting to aid the in-flight navigation and ground movement of aircraft. These
products are used worldwide to guide the navigation of aircraft in various
phases of a flight and in all visibility conditions. Additionally, the Company's
DCI subsidiary provides contract electronic manufacturing services and custom
liquid crystal display devices.
