IMPERIAL BANK
CREDIT AGREEMENT
This Agreement is made by and between Overland Data, Inc. ("Borrower") and
Imperial Bank, a California banking corporation, ("Bank").
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:
1. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
1.01 EXISTENCE AND RIGHTS. Borrower is a corporation duly organized and
existing and in good standing under the laws of California, without limit as to
the duration of its existence and is authorized and in good standing to do
business in the State of California; Borrower has corporate powers and adequate
authority, rights and franchises to own its property and to carry on its
business as now conducted, and is duly qualified and in good standing in each
State in which the character of the properties owned by it therein or the
conduct of its business makes such qualification necessary; and Borrower has the
power and adequate authority to make and carry out this Agreement.
1.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; are not in contravention of or
in conflict with any law or regulation or any term or provision of Borrower's
articles of incorporation, by-laws, as the case may be, and this Agreement is
the valid, binding and legally enforceable obligation of Borrower in accordance
with its terms; subject only to bankruptcy, insolvency or similar laws affecting
creditors rights generally.
1.03 NO CONFLICT. The execution, delivery and performance of this Agreement
are not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any of its property
may be bound or affected, and do not cause any lien, charge or other encumbrance
to be created or imposed upon any such property by reason thereof.
1.04 LITIGATION. Aside from those items listed in the attached Schedule A,
there is no litigation or other proceeding pending or threatened against or
affecting Borrower which if determined adversely to Borrower or its interest
would have a material adverse effect on the financial condition of Borrower,
and Borrower is not in default with respect to any order, writ, injunction,
decree or demand of any court or other governmental or regulatory authority.
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CREDIT AGREEMENT
JUNE 27, 1997
1.05 FINANCIAL CONDITION. The balance sheet of Borrower as of May 31,
1997, a copy of which has heretofore been delivered to Bank by Borrower, and
all other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the
date thereof, and has been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date,
there have been no material adverse changes in the financial condition of
business of Borrower. Borrower has no knowledge of any liabilities,
contingent or otherwise, at such date not reflected in said balance sheet,
and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially
adverse effect upon its financial condition, operations or business as now
conducted.
1.06 TITLE TO ASSETS. Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section 3.03 hereof and/or listed in the attached Schedule B.
1.07 TAX STATUS. Borrower has no liability for any delinquent state, local
or federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
1.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
1.09 REGULATION U. None of the proceeds of any loan from the Bank to
Borrower shall be used to purchase or carry margin stock (as defined within
Regulation U of the Board of Governors of the Federal Reserve system).
2. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, it will, unless Bank shall otherwise consent
in writing:
2.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
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CREDIT AGREEMENT
JUNE 27, 1997
2.02 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment and as to property insurance have Bank named as loss payee in an
Lenders "Loss Payable" Endorsement Form 438BFU or equivalent.
2.03 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
a. The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
b. It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by
it adequate with respect thereto.
2.04 FINANCIAL COVENANTS.
a. TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of not
less than $30,000,000.00. "Tangible Net Worth" is defined as the
excess of all assets (excluding any value for goodwill, trademarks,
patents, copyrights, organization expense and other similar intangible
items), over all liabilities.
b. WORKING CAPITAL. Maintain a minimum Working Capital of
$25,000,000.00. "Working Capital" is defined as the excess of current
assets over current liabilities.
c. CURRENT RATIO. Maintain a ratio of current assets to current
liabilities of 2.0:1.
d. LEVERAGE. Maintain a maximum ratio of total debt to Tangible
Net Worth of 1.0:1.
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CREDIT AGREEMENT
JUNE 27, 1997
2.05 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
a. QUARTERLY FINANCIAL STATEMENT. Within forty-five (45) days after
the close of each quarter of each fiscal year of Borrower, commencing
with the quarter next ending, a balance sheet, profit and loss
statement, and a reconciliation of Borrower's capital accounts, as of
the close of such period and covering operations for the portion of
Borrower's fiscal year ending on the last day of such period, all in
reasonable detail, prepared in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower
and certified by an appropriate officer of Borrower;
b. ANNUAL FINANCIAL STATEMENT. As soon as available, and in any
event within ninety (90) days after the close of each fiscal year of
Borrower, a report of Company as of the close of and for each fiscal
year, all in reasonable detail, prepared on an audited basis by an
independent certified public accountant selected by Borrower and
reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower
and certified by an appropriate officer of Borrower;
c. OTHER INFORMATION. Such other information relating to the affairs
of Borrower as the Bank reasonably may request from time to time;
d. MANAGEMENT LETTER. In connection with each fiscal year end
financial statement furnished to Bank hereunder, any management letter
of Borrower's independent certified public accountant.
2.06 NOTICE OF DEFAULT. Promptly notify Bank in writing of the occurrence
of any Event of Default hereunder ("Event of Default") or any event which upon
notice and lapse of time would be an Event of Default.
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CREDIT AGREEMENT
JUNE 27, 1997
2.07 OPERATING ACCOUNTS. Maintain all primary U.S. accounts and banking
relationship with Bank during the term of any loans from Bank to Borrower.
Borrower shall maintain, or cause to be maintained, on deposit with Imperial
Bank, non-interest bearing demand deposit balances sufficient to compensate Bank
for all services provided by Bank. Balances shall be calculated after reduction
for the reserve requirement of the Federal Reserve Board and uncollected funds.
Any deficiencies shall be charged directly to the Borrower on a monthly basis.
2.08 ATTORNEY'S FEES. Pay promptly to Bank without demand after notice,
with interest thereon from the date of expenditure at the rate applicable to any
loans from Bank to Borrower, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising any such loan
after the occurrence of an Event of Default, whether or not suit is filed. If
suit is brought to enforce any provision of this Agreement, the prevailing party
shall be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
3. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, it will not,
without Bank's written consent (which Bank shall not unreasonably withhold):
3.01 TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business; or make any change in its Chief Executive Officer or
Chief Financial Officer.
3.02 PRIMARY LENDING RELATIONSHIP. Establish its primary lending
relationship with any entity other than Bank.
3.03 LIENS AND ENCUMBRANCES. Other than in the ordinary course of business
and consistent with past practices, create, incur, or assume any mortgage,
pledge, encumbrance, lien or charge of any kind upon any asset now owned, other
than liens for taxes not delinquent and liens in Bank's favor, except for those
already existing as of May 31, 1997.
3.04 LOANS, SECONDARY LIABILITIES. Make any loans or advances to any
person or other entity other than in the ordinary and normal course of its
business and consistent with past practices; or guarantee or otherwise become
liable upon the obligation of any person or other entity, except by endorsement
of negotiable instruments for deposit or collection in the ordinary and normal
course of its business and consistent with past practices.
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CREDIT AGREEMENT
JUNE 27, 1997
3.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Except in
the ordinary course of business, purchase or otherwise acquire assets or
business of any person or other entity with an acquisition price in excess of
$1,000,000.00; or liquidate, dissolve, merge or consolidate, or commence any
proceedings therefor; or sell any significant assets except in the ordinary
course of its business as now conducted; or sell, lease assign or transfer any
substantial part of its business or fixed assets, or any property or other
assets necessary for the continuance of its business as now conducted, including
without limitation the selling of any dividends, property or other asset
accompanied by the leasing back of the same.
4. EVENTS OF DEFAULT
The occurrence of any of the following Events of Default shall, at Bank's
option, terminate Bank's commitment to lend and make all sums of principal and
interest then remaining unpaid on all Borrower's indebtedness to Bank
immediately due and payable, all without demand, presentment or notice, all of
which are hereby expressly waived:
4.01 FAILURE TO PAY. Failure to pay any installment of principal or
interest on any indebtedness of Borrower to Bank within 15 days of any due date.
4.02 BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement binding upon Borrower.
4.03 BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
respect.
4.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
4.05 JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated, unbonded or unstayed for a period
later than five days prior to the date of any proposed sale thereunder.
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CREDIT AGREEMENT
JUNE 27, 1997
4.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
5. CREDIT COMMITMENT
5.01 REVOLVING CREDIT COMMITMENT. Bank agrees to make available to Borrower
a revolving credit line of $5,000,000 (the "Revolving Credit Commitment").
5.02 DIRECT DRAWINGS. Borrower may draw up to $5,000,000 in direct drawings
under the Revolving Credit Commitment.
5.03 LETTERS OF CREDIT. Borrower may utilize up to $5,000,000 in
documentary or standby letters of credit under the Revolving Credit Commitment.
No letter of credit shall expire later than the maturity date of the Revolving
Credit Commitment.
5.04 BANKERS' ACCEPTANCES. As a sublimit within the Revolving Credit
Commitment, Bank will issue up to $4,000,000 in Bankers' Acceptance in minimum
increments of $250,000, with tenor not to exceed 90 days and to be discounted
at Bank's then prevailing Bankers' Acceptance rate plus 225 basis points.
5.05 TOTAL AVAILABILITY. The total direct drawings, letters of credit and
Bankers' Acceptance shall not, at any one time, exceed the Revolving Credit
Commitment.
5.06 UNUSED CREDIT COMMITMENT. Borrower shall pay a 0.50% per annum
non-utilization fee on the unused portion of the Revolving Credit Commitment
on a quarterly basis, in arrears. However, if Borrower maintains average
collected balances in excess of collected balances required to compensate
Bank for depository services rendered, in an amount equal to 10% of the
average Unused Credit Commitment during any quarter, Bank shall waive the
non-utilization fee for that quarter.
5.07 CONSECUTIVE ANNUAL OUT OF DEBT PERIOD. Borrower shall maintain a zero
balance on the Revolving Credit Commitment for at least 30 consecutive days
during each Borrower fiscal year.
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CREDIT AGREEMENT
JUNE 27, 1997
6. MISCELLANEOUS PROVISIONS
6.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Bank or any holder of any note issued by Borrower to Bank, in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this Agreement or any note
issued in connection with a loan that Bank may make hereunder, are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
6.02 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
6.03 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
6.04 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
6.05 OFFSET. In addition to and not in limitation of all rights of offset
that Bank or other holder of any note issued by Borrower in favor of Bank may
have under applicable law, Bank or other holder of such notes shall, upon the
occurrence of any Event of Default or any event which with the passage of time
or notice would constitute such an Event of Default, have the right to
appropriate and apply to the payment of the outstanding under any such note any
and all balances, credits, deposits, accounts or monies of Borrower then or
thereafter with Bank or other holder, within ten (10) days after the Event of
Default, and notice of the occurrence of any Event of Default by Bank to
Borrower.
6.06 SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
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CREDIT AGREEMENT
JUNE 27, 1997
6.07 TIME OF THE ESSENCE. Time is hereby declared to be of the essence of
this Agreement and of every part hereof.
6.08 ACCOUNTING. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
6.09 REFERENCE PROVISION. a. Other than (1) nonjudicial foreclosure and all
matters in connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties arising
out of or relating to this Note ("Agreement"), which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
(defined as the date on which a party subject to the Agreement gives written
notice to all other parties that a controversy, dispute or claim exists), will
be settled by a reference proceeding in California in accordance with the
provisions of Section 638 ET SEG. of the California Code of Civil Procedure
("CCP"), or their successor section, which shall constitute the exclusive remedy
for the settlement of any controversy, dispute or claim concerning this
Agreement, including whether such controversy, dispute or claim is subject to
the reference proceeding and except as set forth above, the parties waive their
rights to initiate any legal proceedings against each other in any court or
jurisdiction other than the Superior Court in the County where the Real
Property, if any, is located or Los Angeles County if none (the "Court"). The
referee shall be a retired Judge of the Court selected by mutual agreement of
the parties, and if they cannot so agree within forty-five (45) days after the
Claim Date, the referee shall be promptly selected by the Presiding Judge of the
Court (or his representative). The referee shall be appointed to sit as a
temporary judge, with all of the powers of a temporary judge, as authorized by
law, and upon selection should take and subscribe to the oath of office as
provided for in Rule 244 of the California Rules of Court (or any subsequently
enacted Rule). Each party shall have one peremptory challenge pursuant to CCP
Section 170.6. The referee shall (a) be requested to set the matter for hearing
within sixty (60) days after the Claim Date and (b) try any and all issues of
law or fact and report a statement of decision upon them, if possible, within
ninety (90) days of the Claim Date. Any decision rendered by the referee will be
final, binding and conclusive and judgment shall be entered pursuant to CCP
Section 644 in any court in the State of California having jurisdiction. Any
party may apply for a reference proceeding at any time after thirty (30) days
following the notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial. All discovery
permitted by this Agreement shall be completed no later than fifteen (15) days
before the first hearing date established by the referee. The referee may extend
such period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised to
such discovery
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CREDIT AGREEMENT
JUNE 27, 1997
or unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Court is empowered to issue temporary and/or provisional remedies, as
appropriate.
b. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
c. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
d. In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
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6.10 MODIFICATION. This Agreement may be modified only by a writing signed
by both parties hereto.
This Agreement is executed on behalf of the parties by duly authorized
representatives as of August 25, 1997, and is effective as of June 27,1997.
IMPERIAL BANK ("BANK")
By: s/s Mike Berrier
--------------------------------
Mike Berrier, Vice President
Date: September 22, 1997
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OVERLAND DATA, INC. ("BORROWER")
By: s/s Scott McClendon
--------------------------------
Scott McClendon, President
Date: September 19, 1997
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