SUPPLEMENTAL LETTER OF CREDIT
AND REIMBURSEMENT AGREEMENT
SUPPLEMENTAL LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this
"Agreement") dated May 31, 2000 is between Evans & Sutherland Computer
Corporation, a Utah corporation (the "Borrower") and Zions First National Bank
("Bank"). In consideration for Bank issuing additional irrevocable letters of
credit during the term provided in Section 2.6 of that certain Loan Agreement
dated March 31, 2000 by and between Borrower and Bank (the "Loan Agreement") in
an aggregate amount of not more than $3,000,000 in excess of the $7,000,000.00
Sublimit set forth in the Loan Agreement (the "Additional Letters of Credit"),
Borrower and Bank agree to the following provisions:
1. Reimbursement. Borrower shall reimburse Bank, at Bank's office in
immediately available United States currency, the amount paid or to be paid by
Bank or Bank's agent, or any party on Bank's behalf on each draft or other
order, instrument or demand drawn or presented under the Additional Letters of
Credit (an "Item"). Items shall be reimbursed on demand. Upon full and timely
reimbursement according to the terms of this Agreement and the Loan Agreement,
the full face amount of the Additional Letters of Credit shall be available to
Borrower throughout the remainder of the stated term of the Additional Letters
of Credit.
2. Commission and Charges. Borrower agrees to pay Bank an issuance fee
in the amount set forth in Section 2.6 of the Loan Agreement, payable on the
date of the issuance of such Additional Letter of Credit and any subsequent
anniversary of the date of issuance. Borrower also agrees to pay Bank (i) a
negotiation fee in the amount of 1/8% of the amount of each draw under each
Additional Letter of Credit, payable on the date of such drawing, and (ii) an
amendment fee in the amount of $35.00 for each amendment to each Additional
Letter of Credit, payable on the effective date of each such amendment.
3. Interest. Borrower shall pay Bank on demand interest at a
fluctuating rate (equal to the rates set forth in Section 2.2 of the Loan
Agreement) on any reserved amount of the proceeds of the Loan extended pursuant
to the Loan Agreement which bears interest in accordance with Section 2.6 of the
Loan Agreement, until such drawn amount is fully repaid pursuant to Section 1
above.
4. Set Off. Borrower authorizes Bank to charge any account or
other funds in Bank's possession for the payment of the Liabilities (as defined
in Section 8 of this Agreement).
5. Continuation of Liability. Regardless of the expiration date of any
Additional Letter of Credit, Borrower shall remain liable hereunder for any draw
or payment made by Bank under the Additional Letter of Credit, (i) timely
received but paid by the Bank within ten (10) days after the expiration date of
the Additional Letter of Credit; or (ii) paid by Bank pursuant to an order of a
court of competent jurisdiction; or (iii) as otherwise authorized by Borrower.
6. Documentation. Unless specified to the contrary in any Additional
Letter of Credit application, or any amendment to any Additional Letter of
Credit, Borrower agrees that Bank and Bank's correspondents may receive and
accept (a) any Items or documents otherwise in order, issued or purportedly
issued by an agent, executor, trustee in bankruptcy, receiver or other
representative of the party who is authorized under such Additional Letter of
Credit to issue such items or other documents, as complying with the terms of
such Additional Letter of Credit and (b) documents which comply with the UCP (as
defined in Section 19 of this Agreement). The provisions of clause (a) above
shall in no way be deemed to preclude the beneficiary of any Additional Letter
of Credit from issuing and presenting Items or documents under the terms of such
Additional Letter of Credit.
Borrower agrees to indemnify and hold Bank harmless from each and every
claim, demand, liability, loss, cost or expense (including, but not limited to,
reasonable attorneys' fees and legal costs) which may arise or be created by
Bank's acceptance of telecommunication instructions in connection with any
Additional Letter of Credit, including, but not limited to, telephonic
instructions in connection with any waiver of discrepancies.
7. Increased Cost/Taxes. If, as a result of any governing law,
regulation, treaty or directive, or any change therein, or in the interpretation
or application thereof or compliance with any request or directive (whether or
not having the force of law) from any court or governmental authority, agency or
instrumentality, any reserve, premium, special deposit, special assessment or
similar requirements against Bank's assets, deposits with Bank or for Bank's
account, or credit extended by Bank, are imposed, modified or deemed applicable
and Bank reasonably determines that, by reason thereof, the cost to Bank of
issuing or maintaining the Additional Letters of Credit is increased, Borrower
agrees to pay Bank upon demand (which demand shall be accompanied by a statement
setting forth the basis for the calculation thereof) such additional amount or
amounts as will compensate Bank for such additional cost. Determinations by Bank
for purposes of this Section of the additional amounts required to compensate
Bank in respect of the foregoing shall be conclusive, absent manifest error.
Borrower further agrees to pay any applicable levies or other taxes imposed in
connection with the Additional Letters of Credit other than net income taxes
payable by Bank, and otherwise comply with all domestic and foreign laws and
regulations applicable to all transactions under or in connection with the
Additional Letters of Credit.
8. Collateral. As security for the performance of all obligations of
this Agreement, Borrower has conveyed security interests in certain real and
personal property described in and evidenced by those instruments executed
concurrently with the Loan Agreement as set forth in Section 2.4 therein, and
certain Investment Property held in Bank's managed account no. 2587850 as set
forth in that certain Managed Agency Account Assignment Agreement. In addition
thereto, Borrower hereby pledges (a) all balances, credits, deposits, accounts
or moneys now or hereafter held by Bank which Borrower owns or in which Borrower
may have an interest, (b) all Items, all shipping documents, warehouse receipts,
policies or certificates of insurance and other documents accompanying or
relating to any Items, and all property covered by any such documents or shipped
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or stored under or in connection with any Additional Letter of Credit or any
Items (whether or not such documents or property is released to Borrower or upon
Borrower's request), and (c) all dividends, distributions and other right in or
with respect to, and substitutions for and products and proceeds of, any of the
foregoing (being referred to collectively as the "Collateral").
In addition, Borrower hereby incorporates all of Borrower's covenants
and obligations concerning the collateral as set forth in the Loan Agreement and
the other Loan Documents identified therein, as well as those provided in the
Managed Agency Account Agreement. The security interest granted by this Section
shall continue, and the provisions of any this Agreement, the Loan Agreement,
and any other instrument or document which secures the Liabilities in favor of
Bank shall continue, until such time as all Liabilities have been paid in full
and discharged and this Agreement has been terminated.
9. Risks/Indemnification. Borrower agrees that any action or omission
by Bank under or in connection with any Additional Letter of Credit or any
Items, documents or property shall, unless in breach of good faith, be binding
on Borrower and shall not put Bank under any resulting liability to Borrower.
Borrower will indemnify Bank and hold Bank harmless from and against each and
every claim, demand, liability, loss, cost or expense (including, but not
limited to, reasonable attorneys' fees and legal costs) to which Bank may be
subjected or which Bank may incur by reason of any such action or omission, or
by reason of any action taken pursuant to this Agreement (including, but not
limited to, by reason of (i) Bank honoring Borrower's request not to make
payment under any Item or (ii) Borrower's actions to restrain Bank from making
payment under any Item), unless in breach of good faith. In no event shall Bank
be liable for incidental, consequential or special damages. The indemnities and
obligations of Borrower contained in this Section shall survive the payment in
full of amounts payable to Sections 1 through 3 hereof and termination of the
Additional Letters of Credit.
10. Discrepancies. Borrower will promptly examine the copy of each
Additional Letter of Credit (and any amendments thereto) sent to Borrower by
Bank, as well as any and all instruments and documents delivered to Borrower
from time to time, and, in the event Borrower has any claim of non-compliance
with Borrower's instructions or of discrepancies or other irregularity, Borrower
will immediately notify Bank thereof in writing, and Borrower will conclusively
be deemed to have waived any such claim against Bank unless such notice is given
within two business days.
11. Exculpation. In addition to the exculpatory provisions contained in
the UPC (as defined hereafter in Section 19), Bank or its correspondents shall
not be responsible for, and Borrower's obligation to reimburse Bank shall not be
affected by: (a) compliance with any laws, customs or regulations in effect in
countries of negotiation or payment of any Additional Letter of Credit; (b)
failure of any Item to refer adequately to any Additional Letter of Credit, or
failure of documents to accompany any Item at negotiation/payment, or failure to
note the amount of any Item on the reverse of such Additional Letter of Credit
or to surrender or to take up such Additional Letter of Credit or to forward
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required documents with Items, each of which provisions, if contained in such
Additional Letter of Credit itself, it is agreed may be waived by Bank, (c) any
refusal by Bank to honor Items because of an applicable law, regulation or
ruling of any governmental agency whether valid or invalid, or now or hereafter
in effect, (d) acts or the failure to act of Bank's agents or correspondents
including, but not limited to, their failure to pay Items because of any law,
decree, regulation, ruling or interpretation of any governmental agency
(domestic or foreign), (e) the identity of any transferee of any Additional
Letter of Credit or the sufficiency of the transfer if such Additional Letter of
Credit is transferable, (f) the use which may be made of any Additional Letter
of Credit or any acts or omissions by any beneficiary of transferee in
connection therewith, or (g) the validity, sufficiency or genuineness of
documents, or of any endorsements thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged.
In furtherance of, and not in limitation of the foregoing, Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
Bank shall not be liable or responsible for (a) the time, place, manner
or order in which shipment is made or partial or incomplete shipment, (b)
insurance of any property or any risk connected with insurance, (c) delay in
arrival or failure to arrive of any property or any documents relating thereto,
(d) delay in giving or failure to give notice of arrival or any other notice,
(e) the validity, form, sufficiency, accuracy, genuineness, falsification or
legal effect of any documents, or the validity, genuineness, falsification or
legal effect of any Items, (f) general or particular conditions stipulated in
documents or superimposed thereon, (g) the description, existence, character,
quantity, weight, quality, condition, packing, shipment, arrival, delivery or
value of any property purportedly represented by any documents, or any
difference therein from that expressed in the documents, (h) the acts or
omissions, good faith, solvency, performance or standing of any vendor, shipper,
issuer, consignor, carrier, insurer, user of the Additional Letter of Credit,
correspondent or other bank (whether or not selected by Bank) or anyone else,
(i) loss of, or errors, omissions, interruptions or delays in transmission or
delivery of, any messages, letters or documents by mail, cable, telegraph,
telex, facsimile or otherwise and whether or not in cipher, (j) the translation
of, or errors in translation or interpretation of, credit or technical terms,
(k) transmission of credit terms without translating them, or (l) consequences
arising out of acts of God, interruptions of communication facilities, war
disturbances, abnormal or emergency conditions, or other causes beyond Bank's
control, or out of strikes or lockouts and none of the foregoing shall affect or
impair, or prevent the vesting of any of Bank's rights and remedies or
Borrower's obligations hereunder.
12. Costs and Expenses. Borrower agrees to pay on demand all reasonable
costs and expenses (including, but not limited to, reasonable attorney's fees
and legal costs) in connection with (i) the Additional Letters of Credit or this
Agreement or its enforcement or (ii) any action or proceeding restraining or
seeking to restrain Bank from paying, or seeking to compel Bank to pay, any
amount under any Additional Letter of Credit.
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13. Amendments and/or Modification of Additional Letters of Credit. If
Borrower requests Bank to increase the amount of any Additional Letter of
Credit, extend or renew any Additional Letter of Credit, or otherwise modify the
terms of any Additional Letter of Credit, Borrower agrees that this Agreement
shall continue to bind Borrower with respect to any action taken by Bank or any
of its correspondents in accordance with such increase, extension, renewal or
other modification.
14. Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" hereunder: (a) Borrower shall fail to pay
any amount payable under this Agreement when due; (b) Borrower shall fail to
perform or observe any other term, covenant or agreement contained in this
Agreement; (c) the filing by or against Borrower or any guarantor of the
Liabilities ("Guarantor") of a request or petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a bankrupt,
relief as debtor or other relief under the bankruptcy, insolvency or similar
laws of the United States or any state or territory thereof or any foreign
jurisdiction, now or hereafter in effect; (d) the making of any general
assignment by Borrower or any Guarantor for the benefit of creditors; the
appointment of a receiver or trustee for Borrower or any Guarantor, or for any
assets of Borrower or any Guarantor including, without limitation, the
appointment of or taking possession by a "custodian", as defined in the federal
Bankruptcy Code or otherwise; the making of any, or sending notice of any
intended bulk sale; or the institution by or against Borrower or any Guarantor
of any other type of insolvency proceeding under the federal Bankruptcy Code or
otherwise, or of any formal or informal proceeding for the dissolution or
liquidation or settlement of claims against or winding up of affairs of Borrower
or any Guarantor; (e) any provision of this Agreement shall at any time for any
reason cease to be valid and binding on Borrower, or shall be declared to be
null and void, or the validity or enforceability thereof shall be contested by
Borrower, or a proceeding shall be commenced by any governmental agency or
authority having jurisdiction over Borrower seeking to establish the invalidity
or unenforceability thereof, or Borrower shall deny that it has any or further
liability or obligation under this Agreement; or (f) any default shall occur
under any agreement by and among Borrower and Bank.
If any Event of Default shall have occurred and be continuing, Bank
may: (a) by written notice to Borrower direct Borrower to pay immediately to
Bank an amount equal to Bank's potential liability under all Additional Letters
of Credit, whether or not any Item shall have been presented thereunder; (b)
offset any funds of Borrower held by Bank; (c) pursue any other remedy available
to it under this Agreement, the Loan Agreement or pursuant to the terms of any
other documents executed in accordance herewith; or (d) take any and all actions
with respect to the Collateral as allowed by applicable law.
15. Documents. Borrower agrees that (a) Bank may accept as "bills of
lading" under Additional Letters of Credit any documents issued or purportedly
issued by or on behalf of any carrier which acknowledge receipt of property for
transportation, whatever the specific provisions of such documents, (b) Bank may
accept as documents of insurance either insurance policies or insurance
certificates, (c) Bank may accept as sufficient and controlling the description
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of any property contained in any invoice notwithstanding that any bills of
lading, insurance or other documents (which Bank may also accept) may contain a
description different from that contained in such invoice, and (d) Bank may
accept any document containing stamped, written or typewritten provisions
thereon, whether or not signed or initialed, and may assume conclusively that
the same were placed with authority on the document at the time of its issuance
by the carrier or other issuer or any agent thereof.
16. Release of Documents or Property. In the event that Bank receives
some but not all of the documents against which drawings may be made and, at
Borrower's request, Bank delivers such documents to Borrower or to anyone else,
or in the event that Bank, at Borrower's request, releases or consents to the
release of some or all of the property shipped or purported to have been shipped
under any Additional Letter of Credit prior to the presentation of the relative
Item, Borrower agrees to pay Bank on demand the amount of any claim made against
Bank by reason thereof and authorizes Bank to honor such Item when it is
presented regardless of whether or not such Item or any document which may
accompany it complies with the terms of such Additional Letter of Credit.
17. Delay and Waiver. No delay in the exercise of Bank's rights or
remedies shall be deemed a waiver, and no partial exercise of Bank's rights or
remedies shall preclude the further exercise of any right or remedy. No waiver
shall be effective unless in writing and then only as to the specific subject
waived.
18. Notice. All Notices to required shall be given to the parties
shall be delivered in accordance with the provisions of Section 9.6 of the Loan
Agreement. "Notice" shall include any request, demand or other communication.
19. Construction and Interpretation. The Additional Letters of Credit
and this Agreement shall be governed by the laws of the State of Utah, including
the Uniform Commercial Code. Unless inconsistent with Utah law, the Additional
Letters of Credit and this Agreement are subject to the terms of the Uniform
Customs and Practice for Documentary Credits (1993 Revision), the International
Chamber of Commerce Publication No. 500 ("UCP"), as hereby expressly
incorporated by reference.
20. Assigns. This Agreement is binding upon the parties hereto and
their respective successors and assigns.
21. Severability. If any term or provision set forth in this Agreement
shall be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms or provisions to persons or circumstances, other than
those to which it is held invalid or unenforceable, shall be construed in all
respects as if such invalid or unenforceable term or provision were omitted.
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22. ARBITRATION DISCLOSURES:
A. ARBITRATION IS FINAL AND BINDING ON BORROWER AND BANK
(COLLECTIVELY, THE "PARTIES") AND SUBJECT TO ONLY VERY LIMITED
REVIEW BY A COURT.
B. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE
IN COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
C. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN
COURT.
D. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK
MODIFICATION OF ARBITRATORS' RULINGS IS VERY LIMITED.
E. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR
WAS AFFILIATED WITH THE BANKING INDUSTRY.
F. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY
OR THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the Parties
and their assigns, including but not limited to Disputes arising out of or
relating to the Additional Letters of Credit, this Agreement, this arbitration
provision ("arbitration clause"), or any related agreements or instruments
relating hereto or delivered in connection herewith ("Related Documents"), and
including but not limited to a Dispute based on or arising from an alleged tort,
shall at the request of any Party be resolved by binding arbitration in
accordance with the applicable arbitration rules of the American Arbitration
Association ("the Administrator"). The provisions of this arbitration clause
shall survive any termination, amendment, or expiration of this Agreement or the
Related Documents. The provisions of this arbitration clause shall supersede any
prior arbitration agreement between or among the Parties. If any provision of
this arbitration clause should be determined to be unenforceable, all other
provisions of this arbitration clause shall remain in full force and effect.
(b) The arbitration proceedings shall be conducted in Salt Lake City,
Utah, at a place to be determined by the Administrator. The Administrator and
the arbitrator(s) shall have the authority to the extent practicable to take any
action to require the arbitration proceeding to be completed and the
arbitrator(s)' award issued within one-hundred-fifty (150) days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall have the authority
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to impose sanctions on any Party that fails to comply with time periods imposed
by the Administrator or the arbitrator(s), including the sanction of summarily
dismissing any Dispute or defense with prejudice. The arbitrator(s) shall have
the authority to resolve any Dispute regarding the terms of this Agreement, this
arbitration clause or the Related Documents, including any claim or controversy
regarding the arbitrability of any Dispute. All limitations periods applicable
to any Dispute or defense, whether by statute or agreement, shall apply to any
arbitration proceeding hereunder and the arbitrator(s) shall have the authority
to decide whether any Dispute or defense is barred by a limitations period and,
if so, to summarily enter an award dismissing any Dispute or defense on that
basis. The doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a Party
must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the
subject matter of the Dispute. The arbitrator(s) may in the arbitrator(s)'
discretion and at the request of any Party: (1) consolidate in a single
arbitration proceeding any other claim or controversy involving another Party
that is substantially related to the Dispute where that other Party is bound by
an arbitration clause with the Bank, such as borrowers, guarantors, sureties,
and owners of collateral; (2) consolidate in a single arbitration proceeding any
other claim or controversy that is substantially similar to the Dispute; and (3)
administer multiple arbitration claims or controversies as class actions in
accordance with the provisions of Rule 23 of the Federal Rules of Civil
Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of
the Administrator from panels maintained by the Administrator. A single
arbitrator shall have expertise in the subject matter of the Dispute. Where
three arbitrators conduct an arbitration proceeding, the Dispute shall be
decided by a majority vote of the three arbitrators, at least one of whom must
have expertise in the subject matter of the Dispute and at least one of whom
must be a practicing attorney. The arbitrator(s) shall award to the prevailing
Party recovery of all costs and fees (including attorneys' fees and costs,
arbitration administration fees and costs, and arbitrator(s)' fees). The
arbitrator(s), either during the pendency of the arbitration proceeding or as
part of the arbitration award, also may grant provisional or ancillary remedies
including but not limited to an award of injunctive relief, foreclosure,
sequestration, attachment, replevin, garnishment, or the appointment of a
receiver.
(d) Judgment upon an arbitration award may be entered in any court
having jurisdiction, subject to the following limitation: the arbitration award
is binding upon the Parties only if the amount does not exceed Four Million
Dollars ($4,000,000.00); if the award exceeds that limit, any Party may demand
the right to a court trial. Such a demand must be filed with the Administrator
within thirty (30) days following the date of the arbitration award; if such a
demand is not made within that time period, the amount of the arbitration award
shall be binding. The computation of the total amount of an arbitration award
shall include amounts awarded for attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any
rights hereunder, shall limit the right of any Party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral or
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other security; (2) exercise self-help remedies, including but not limited to
repossession and setoff rights; or (3) obtain from a court having jurisdiction
thereover any provisional or ancillary remedies including but not limited to
injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver. Such rights can be exercised at
any time, before or during initiation of an arbitration proceeding, except to
the extent such action is contrary to the arbitration award. The exercise of
such rights shall not constitute a waiver of the right to submit any Dispute to
arbitration, and any claim or controversy related to the exercise of such rights
shall be a Dispute to be resolved under the provisions of this arbitration
clause. Any Party may initiate arbitration with the Administrator; however, if
any Party initiates litigation and another Party disputes any allegation in that
litigation, the disputing Party--upon the request of the initiating Party--must
file a demand for arbitration with the Administrator and pay the Administrator's
filing fee. The Parties may serve by mail a notice of an initial motion for an
order of arbitration.
(f) Notwithstanding the applicability of any other law to this
Agreement, the arbitration clause, or Related Documents between or among the
Parties, the Federal Arbitration Act, 9 U.S.C.ss.1 et seq., shall apply to the
construction and interpretation of this arbitration clause.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers or representatives
thereto duly authorized as of the date first above written.
EVANS & SUTHERLAND ZIONS FIRST NATIONAL BANK
COMPUTER CORPORATION,
a Utah corporation
By: /s/ Richard Gaynor By: /s/ Michael Brough
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Title: Vice President and CFO Title: Vice President
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