Commercial Credit and Security Agreement
THIS COMMERCIAL CREDIT AND SECURITY AGREEMENT (the "Agreement"), dated as
of the 2nd of March, 1998, is entered between Evans & Sutherland Computer
Corporation (the "Borrower") and First Security Bank, N.A. ("Lender").
Borrower has requested Lender to extend credit to Borrower for certain
purposes, and Lender is willing to make such a loan (hereinafter the "Loan") on
the terms and conditions of this Agreement. Therefore, the parties agree as
follows:
SECTION 1. AMOUNT AND TERMS OF THE LOAN.
1.1 The maximum principal amount of the Loan shall be Five Million Dollars
($5,000,000.00).
1.2 The Loan shall consist of two separate facilities:
(a) A Standby Letter of Credit Commitment ("L/C Line"), which may be
used up to a maximum amount of Four Million Dollars ($4,000,000.00). So
long as any amounts remain unutilized under this L/C Line, or if any
letter of credit issued under the L/C Line expires undrawn, Borrower
may have issued and reissued letters of credit up to and the maximum
amount listed above so long as no default exists under this Agreement.
Each letter of credit issued under the L/C Line shall be charged a fee
of 0.75% of the amount of the letter of credit issued, plus the
standard per item charges assessed by First Security.
(b) A Foreign Exchange Line of Credit (FX Line). From time to time from
the date hereof through and including the Termination Date, and upon
request of Borrower Lender will enter into Foreign Exchange Contracts
with Borrower of up to the maximum aggregate amount, at any time
subject to outstanding contracts (not yet settled), that will not cause
the FX Line amount outstanding to exceed One Million Dollars
($1,000,000.00), provided that there is sufficient availability under
the FX Line.
1.3 The Loan shall be evidenced by, or consist of the following:
(a) In the case of the L/C Line, for each letter of credit issued, an
Application, Agreement and Note for Standby Documentary Credit which
obligates Borrower to repay the Loan upon Demand should any draw be
made on a letter of credit (collectively the "Note"). The Loan shall be
repaid to Lender and shall accrue interest as set forth in the Note. In
particular, should an event of default occur under this Agreement,
which may include, but not be limited to, failure to repay any draw
upon a letter of credit upon Lender's demand, or the occurrence of any
event of default as outlined in Section 5.1 of this Agreement, Borrower
shall then be assessed a default rate of interest which shall be equal
to Lender's Prime Rate of interest plus two percentage points.
Notwithstanding any contradiction which may exist in the Note, the rate
herein stated to be assessed upon the occurrence of an event of default
of Borrower shall take precedence.
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(b) With respect to the FX Line, the Foreign Exchange Contract which
will be offered by Lender to Borrower shall be to fix, at the date that
it enters into purchase contracts with various foreign suppliers, the
dollar cost of various foreign currencies. Except as otherwise
provided, the Foreign Exchange Contracts which will be offered by
Lender shall be either spot or forward contracts. The terms of such
spot and forward contracts shall be the standard spot or forward
contact format then generally offered by Lender to its customers,
subject to the rights of Lender and Borrower to then negotiate special
terms and also to provide for the length of the forward contracts.
(Lender initially intends not to enter into Foreign Exchange Contracts
having terms longer than 12 months). Lender reserves the right to
require, in connection with such forward contracts or any other variety
of Foreign Exchange Contract between Lender and Borrower, that delivery
of foreign currencies to the party specified by Borrower, shall be
conditioned upon prior deposit of the dollar purchase price of said
foreign currencies with Lender immediately before the time that Lender
must wire or otherwise give instruction for foreign currency delivery.
The submission of a request for a Foreign Exchange Contract shall also
be deemed to constitute a reaffirmation of the representations and
warranties which are set forth hereunder.
The availability of all Foreign Exchange Contracts will be subject to the
condition of payment by Borrower of the fees, charges and contract amounts which
are required as a condition precedent by Lender for such contracts, provided
that Lender agrees that such fees charges and contract amounts shall be
reasonably related to such fees generally charged by Lender or charged by other
offerors of such contracts.
The obligations of Lender hereunder, are specifically conditioned upon the
Lender having normal access to foreign exchange markets and to facilities for
the purchase of foreign currencies for its own account and the account of other
customers.
1.4 Each facility shall be stated to mature on May 15, 1999.
1.5 All payments shall be made to Lender at the address specified in this
Agreement in lawful money of the United States of America. All payments
received by Lender shall be applied as follows: first, toward the
satisfaction of commitment fees, origination fees, attorneys' fees and
costs incidental thereto and to advances made and costs and expenses
incurred by Lender or its agent to enforce Borrower's Obligations
hereunder and under the Loan Documentation; second, toward the
reduction of any and all accrued and unpaid interest, including
uncollected late charges; third, toward the reduction of unpaid
principal; and fourth, to prepayment of Obligations which may arise
from any outstanding letters of credit.
1.6 To the extent of available credit under the L/C Facility, Lender hereby
agrees to issue letters of credit for the account of Borrower payable
to parties other than Borrower or its affiliates, upon such terms
relating to draws and other matters as are consented to in writing by
Lender. The amount of all letters of credit issued for the account of
Borrower, shall be deemed to be an advance under the Loan, whether or
not a draw on a letter of credit has been made. Such letters of credit
shall be issued only upon proper application therefore, in form and
substance satisfactory to Lender, including provisions for
reimbursement of any draws on issued letters of credit. No letter of
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credit shall be issued which has a termination date later than one year
beyond the maturity date of the Loan. Borrower shall pay all normally
charged application, origination and letter of credit fees with respect
to each letter of credit, in addition to the fees and interest charges
otherwise provided under this Agreement and the other Loan
Documentation. Each application for a letter of credit shall be deemed
to be a reaffirmation of all warranties and representations made in
this Agreement and the other Loan Documentation including without
limitation a warranty and representation that no event of default has
occurred.
Any acceleration of the Loan upon the occurrence of an event of default
shall be treated at Lender's option as a draw of the entire amount of all
outstanding letters of credit so as to impose an immediate and present
obligation to pay over to Lender sums equal to all such amounts. Thereafter, if
any outstanding letter should expire undrawn, Lender agrees, to the extent of
actual prior payment not previously paid out pursuant hereto, to pay the same
over the Borrower.
1.7 In addition to this Agreement, the Notes and any applicable Foreign
Exchange Contracts, references to "Loan Documentation" shall include
all instruments, trust deeds, mortgages, other assignments, other
security agreements, other pledge agreements, lien instruments,
guaranties, subordinations, financing statements, notices, lien
waivers, certificates (including hazardous waste certificates and
indemnities), certificates of title, applications for certificates of
title, environmental indemnities, and all other documents set forth in
or as otherwise required by Lender as a condition to or in connection
with the Loan, whether now or hereafter executed.
1.8 Any of the following persons is authorized to make a written or oral
request to Lender to advance funds under this Agreement: Mark McBride,
John Lamley, and Grant Schultz. Lender is under no obligation to verify
the identify of an individual representing to be one of the foregoing
persons. Any advance made pursuant to said written or oral request is
irrebuttably presumed to be made for Borrower's benefit. Lender shall
make disbursements on the Loan to Borrower or for the account of
Borrower unless Borrower directs otherwise in writing.
1.9 The obligations, indebtedness, covenants and liabilities of Borrower,
set forth or contemplated in the Loan Documentation shall be referred
to as the "Obligations," including without limitation any indebtedness
resulting from any overdraft on any account with Lender (provided that
nothing herein shall be a commitment by Lender to honor overdrafts).
1.10Any and all fees, costs and expenses, of whatever kind or nature,
including but not limited to attorneys' fees, incurred by Lender in
connection with this Agreement (whether or not a letter of credit is
issued for the Borrower or a Foreign Exchange Contract is written)
shall be borne and paid by Borrower on demand by Lender and until so
paid constitute part of the Obligations of Borrower and shall accrue
interest at the Note rate or, if applicable at the default rate.
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SECTION 2. CONDITIONS.
2.1 Lender shall not be required to issue letters of credit or foreign
exchange contracts under this Agreement unless Lender shall have
received from Borrower the following:
(a) Current financial statements in such form as Lender may require;
(b) The fully executed Loan Documentation;
(c) Corporate resolutions and documents evidencing the good standing of
Borrower and the due and proper execution of the Loan Documentation by
authorized representatives; and
(d) Such other documentation and information that Lender or it counsel
may request given the circumstances and terms of the Loan.
2.2 Lender shall not be required to make any advance under the Loan,
including the issuance of any additional letters of credit or provide a
foreign exchange contract if a default or an event of default under the
Loan Documentation exists or if an event has occurred that with the
passage of time would constitute such a default or event of default.
3. REPRESENTATIONS AND WARRANTIES OF BORROWER.
To induce Lender to make the Loan, Borrower warrants and represents as
follows:
(1) Borrower is in good standing under, and in full compliance with,
all applicable laws, codes, rules and regulations under federal, state
and municipal authority, including without limitation the proper use,
storage registration and disposal of any hazardous materials.
(2) Borrower has full power, authority and capacity to incur the
indebtedness described herein and to execute the Loan Documentation.
The person or persons executing this Agreement and the other Loan
Documentation on behalf of Borrower are a duly authorized to do so.
(3) The Loan Documentation is in all respects legal, valid, and binding
according to its terms. The execution and performance of the Loan
Documentation will not violate any applicable law, regulation, order,
judgment or decree, partnership agreement, article of incorporation,
bylaw, article of organization, operating agreement, indenture,
contract or agreement that purports to be binding on the Borrower or
its assets, and will not result in the creation of any encumbrance on
the assets of Borrower except as contemplated by the Loan
Documentation.
(4) Any financial statements of Borrower heretofore delivered to Lender
are true and correct in all respects. The most recent statements given
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to Lender accurately represent the current financial condition of
Borrower, and, since the date of such statements, the business,
properties, assets, and liabilities of Borrower have not been adversely
affected or changed in any material way.
(5) All written representations previously made and information
previously given by Borrower or Borrower's agents to Lender or its
agents remain true and correct.
(6) Borrower is not in default under any indebtedness, lease, contract,
license, undertaking, or other agreement which will affect the ability
of Borrower to perform under any of the Loan Documentation.
(7) There are no existing actions, suits, or proceedings pending or
threatened against Borrower or relating to the business, properties,
and assets of Borrower that may have an adverse effect upon the
financial condition, the business or the assets of Borrower, and no
judgment, order, or decree has been rendered which has not been
discharged, satisfied, or complied with other than those disclosed to
lender in writing.
(8) Borrower has filed all federal and state income tax returns which
are required to be filed (except returns for which extensions have been
properly filed) and has paid all taxes, assessments and governmental
charges or levies imposed upon Borrower or upon Borrower's income or
profits, or upon any property belonging to Borrower, to the extent that
such taxes and assessments have become due (except such taxes and
assessments that are being contested in good faith by appropriate
proceedings diligently prosecuted and that have been disclosed to
Lender in writing).
(9) Borrower has good title to its assets, and including the properties
and assets reflected in he most recent statements given to Lender.
SECTION 4. COVENANTS OF BORROWER.
4.1 Borrower shall promptly furnish Lender, during the term of the Loan,
copies of such tax returns and financial reports and statements as
requested by Lender, all prepared in a manner and form and at such
times as are acceptable to Lender. At a minimum Borrower shall provide
to lender a CPA audited annually within one hundred twenty (120) days
after the end of each fiscal year. Interim statements shall be provided
quarterly, forty-five (45) days after the end of each such interim
period. Upon request, Borrower shall provide to Lender a quarterly
report summarizing the Borrower's activities of that quarter and a
certification that Borrower is in compliance with this Agreement.
4.2 Borrower shall promptly give notice to Lender of (a) the occurrence of
any default or event of default under any of the Loan Documentation;
(b) any litigation, proceedings or event that may have an adverse
effect upon the financial condition, the business or the assets of
Borrower; (c) any dispute between Borrower and any governmental
regulatory body or other party that may interfere with the normal
business operation of Borrower or adversely affect the assets of
Borrower; and (d) any adverse change in the financial condition of
Borrower.
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4.3 Borrower will:
(a) duly observe and conform to all requirements of any governmental
authorities relative to the conduct of Borrower's business or to
Borrower's properties or assets, including without limitation the
proper use, storage, registration and disposal of any hazardous
materials;
(b) maintain and keep in full force and effect all licenses and permits
necessary to the property conduct of Borrower's business, including the
continuance of Borrower's good standing; and
(c) pay all obligations and liabilities when due, including without
limitation all taxes, assessments and governmental charges or levies
imposed upon Borrower or upon Borrower's income or profits, or upon any
property belonging to Borrower, and maintain appropriate reserves for
the accrual of the same in accordance with generally accepted
accounting principles.
4.4 Borrower will keep proper books and records in which fully, true and
correct entries (and in a manner acceptable to Lender) will be made of
all dealings or transactions relating to its business activities.
4.5 Borrower will maintain, with financially sound and responsible
companies, hazard and liability insurance in such form and in such
amounts and against such risks as is customarily carried by companies
engaged in the assume or similar business and operating like
properties.
4.6 Borrower will permit Lender or its agents to inspect the corporate
books and financial records of Borrower an to discuss the affairs,
finances and assets of Borrower with Borrower, all at such reasonable
items and as often as Lender may reasonably request.
4.7 Borrower will not create or suffer to exist any lien or encumbrance on
any of the assets of Borrower except (1) clients in favor of Lender;
(2) liens for taxes or assessments not yet payable; (3) mechanic's or
materialman's liens arising in the ordinary course of business that are
not overdue; (4) deposits or pledges to secure the payment of worker's
compensation, unemployment or other social security benefits, or to
secure the performance of bids, tenders, contracts (other than for
borrowed money), leases, public or statutory obligations, security or
appeal bonds or other obligations of a similar nature incurred in the
ordinary course of business; or (5) liens to which Lender has
previously consented in writing. Borrower shall notify Lender in
writing immediately upon receipt of notice of the imposition of any
lien, levy, attachment or execution on the business or assets of
Borrower. Borrower shall cause such liens or other process not
permitted by this Section to be satisfied immediately. Lender may
discharge such unpermitted liens and encumbrances, and any such amounts
shall become part of the Obligations, shall be repaid to Lender on
demand, and shall accrue interest as set forth as the default rate of
interests hereinabove.
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4.8 Borrower will not guarantee, endorse or otherwise become surety for the
obligations of any other person or entity without the prior written
consent of Lender, except with respect to consumer-related obligations
and with respect to checks, drafts and similar instruments for deposit
or collection in the ordinary course of Borrower's business. Without
prior written consent of Lender, Borrower agrees that it will not loan
to or provide credit accommodations to third parties, except as
associated with transactions in the ordinary course of business.
4.9 Borrower shall immediately notify Lender in writing of any change in
the location of Borrower's business or any change in Borrower's name,
any change in the key management or ownership of Borrower or any change
in the agreements affecting the structure of Borrower or the operation
of its business. Without the prior written consent of Lender, Borrower
will not become party to or involved in any merger, consolidation or
change of form or structure or other like change or acquisition.
Borrower shall not redeem or purchase its own stock. Furthermore,
Borrower shall not commingle its funds with any other entity.
SECTION 5. DEFAULT AND REMEDIES.
5.1 The occurrence of any of the following shall constitute an event of
default under this Agreement (references to "Borrower" in this Section
5.1 shall include each other party to the Loan Documentation):
(a) Failure to pay when due any principal or interest or other
monetary indebtedness under the Obligations;
(b) Any representation or warranty made by Borrower in the Loan
Documentation or in connection with any borrowing hereunder, or in any
certificate, financial statement or other statement furnished by
Borrower pursuant hereto is untrue in any respect at the time when
made;
(c) Failure of Borrower to observe or perform any of the covenants or
agreements contained in the Loan Documentation;
(d) Any material provisions of the Loan Documentation shall for any
reason cease to be in full force and effect;
(e) Borrower shall default on any other obligation owed to Lender or
other Lender;
(f) Filing by or against Borrower of a petition in bankruptcy or for
any other relief under the Bankruptcy Code, as amended, or under any
other insolvency act or law, state or federal, now or hereafter
existing, or any action by Borrower indicating Borrower's consent to,
approval of, or acquiescence in, any such petition or proceeding; the
application by Borrower, or the consent or acquiescence of Borrower to
the appointment of a receiver or trustee for Borrower or for all or a
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substantial part of Borrower's property; the making by Borrower of an
assignment for the benefit of creditors under state law; or the
admission of Borrower in writing of Borrower's inability to pay
Borrower's debts as they mature;
(g) The involuntary appointment of a receiver or trustee for Borrower
or for all or a substantial part of Borrower's property; or the
issuance of a warrant of attachment, execution or similar process
against any substantial part of the property of Borrower;
(h) All of any substantial part of the property of Borrower shall be
sold, assigned, transferred, or shall be condemned, seized or otherwise
appropriated, or custody or control of such property shall be assumed
by any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency;
(i) The occurrence of any adverse change in the financial condition of
Borrower or the status of the Collateral deemed material by Lender;
(j) Lender deems itself insecure.
5.2 If any of the events set forth in Section 5.1 occurs:
(a) Lender may (i) terminate any obligation to issue further letters of
credit or further Foreign Exchange Contracts under the Loan; (ii)
declare the entire Obligations outstanding hereunder to be immediately
due and payable, whereupon the amount of any outstanding letter of
credit, or the principal amount of any draw under any letter of credit,
together with accrued interest thereon, shall become immediately due
and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything contained
herein or in the Note to the contrary notwithstanding; and/or (iii)
proceed to enforce any of its remedies under the Loan Documentation,
including this Agreement.
(b) All demands and presentments of any kind or nature are expressly
waived by Borrower. Borrower waives the right to require Lender to
pursue any other remedy for the benefit of Borrower and agrees that
Lender may proceed against Borrower for the amount of the Obligations
owed by Borrower to Lender without taking any action against any other
party. Borrower authorizes Lender, at its option, to apply toward the
payment of the obligations all balances of any deposit account in the
name of Borrower held by Lender.
(c) Lender may proceed to enforce any of its remedies under the Loan
Documentation, including this Agreement, or provided by law.
No remedy given to Lender in the Loan Documentation is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to any other remedy given under the Loan
Documentation or now or hereafter existing at law or in equity or by statutes.
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5.3 The Borrower agrees to cooperate with Lender in effectuating Lender's
right notwithstanding any unanticipated inability of Borrower to pay the Loan or
otherwise perform the Obligations.
SECTION 6. MISCELLANEOUS.
6.1 Time is of the essence of this Agreement. No issuance of a letter of
credit or a Foreign Exchange Contract under the Loan shall constitute a
waiver of any of the conditions to Lender's obligation to make further
advances, nor, in the event Borrower is unable to satisfy any such
condition, shall any failure on Lender's part to immediately enforce
its remedies have the effect of precluding Lender from thereafter
declaring such inability to be an event of default under this
Agreement. No failure or delay on the part of Lender in exercising any
right, power or privilege hereunder or under the Loan Documentation
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The consent or approval by Lender to
or of any act by Borrower requiring further consent or approval shall
not be deemed to waive or render unnecessary the consent or approval to
or of any subsequent act. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
6.2 Borrower shall pay all attorneys' fees, paralegal fees, costs,
including without limitation costs and expenses incurred by Lender in
the enforcement of its rights hereunder and the other Loan
Documentation, whether any default is ultimately cured or Lender is
obligated to pursue its remedies hereunder, including such expenses
incurred before legal action, during the pendency of any such legal
action, during the enforcement of Lender's rights in any bankruptcy or
insolvency proceedings, and continuing to all such expenses in
connection with any appeal to higher courts arising out of matters
associated herewith. Until so paid, all such fees, costs, and expenses
shall constitute part of the obligations of Borrower and shall accrue
interest at the default rate.
6.3 Borrower hereby agrees to indemnify and hold harmless Lender, its
directors, officers and employees from any and all liability, expense,
costs, charges or assessments, including attorneys' fees and expenses,
whether incurred or imposed pursuant to local, state or federal law.
Borrower also agrees to indemnify and hold harmless Lender, its
directors, officers and employees from and against any and all
liability, expense, damage, demands, claims and lawsuits, including
attorneys' fees and expenses, arising out of this Agreement or the
other Loan Documentation or in connection therewith, unless arising
from Lender's willful misconduct.
6.4 In addition to this Agreement and the other Loan Documentation, this
finance transaction may include closing documentation such as
resolutions, waivers, notices, acknowledgments, statements, closing or
escrow instructions, loan purpose statements, and other documents that
Lender may customarily use in closing such transactions. Such
additional documents are incorporated herein by this reference. The
Loan Documentation and the closing documents to which this Section
refers, as applicable, express, embody and supersede any previous
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understandings, agreements or promises (whether oral or written) with
respect to this finance transaction, and said documents represent the
final expression of the agreement between Lender and Borrower, the
terms and conditions of which cannot hereafter be contradicted by any
oral understanding not reduced to writing and identified above. This
Section shall govern in the event it is inconsistent with any similar
provision in any other Loan Documentation.
6.5 Any notice required by any Loan Documentation will be deemed effective
if personally delivered to the party to which notice is being given,
or, in the alternative, on the date such notice is placed, first-class
mail, in the U.S. Mail addressed to the party to which notice is being
given, at such address as is set forth below. In the event another
agreement constituting part of the Loan Documentation sets forth a
notice procedure, such procedure shall govern for purposes of that
document and thus supersede the terms of this Section if inconsistent.
6.6 All representations and warranties made in this Agreement and the Note
and in any certificates delivered pursuant hereto and thereto shall
survive the execution and delivery of this Agreement and the making of
the Loan hereunder and shall survive payment of the Loan. This
Agreement shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns, except that the
Borrower may not assign or transfer its right hereunder without the
written consent of Lender. It is understood that Lender may sell the
Loan and its interests under the Loan Documentation without the need
for Borrower's consent and may procure other Lenders to participate in
the Loan, and Lender may issue participation certificates to such other
Lenders.
6.7 Borrower agrees to execute any other documentation and provide such
other information and documentation as Lender may reasonably require.
Any provision of this Agreement or any other constituents of the Loan
Documentation, which may be found to be invalid, shall be deemed
separable and shall not invalidate the remainder of the provisions. No
third party shall, under any circumstances, be deemed to be a
beneficiary under the Loan Documentation or any condition set forth
therein. Nothing in the Loan Documentation shall create a partnership
or joint venture between Lender and Borrower.
6.8 This Agreement may be signed in any number of counterparts, each of
which shall be deemed an original, and such counterparts together shall
constitute one and the same instrument. This Agreement and the other
Loan Documentation shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Utah. If Borrower is not a
resident of the State of Utah, Borrower hereby consents to the
jurisdiction of the courts of the State of Utah to enforce this
Agreement and the other Loan Documentation.
6.9 The obligations of Borrower (if there is more than one Borrower) under
the Loan Documentation, including warranties and representations, shall
be joint and several.
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DATED this 9th day of March, 1998.
BORROWER:
Evans & Sutherland Computer Corporation
By:/S/ JOHN LEMLEY
Its:CHIEF FINANCIAL OFFICER
Address:600 Komas Drive
P.O. Box 58700
Salt Lake City, Utah 84158
LENDER:
First Security Bank, N.A.
By:/S/ TROY AKAGI
Its:VICE PRESIDENT
Address:15 East 100 South, 2nd Floor
Salt Lake City, Utah 84111