EXHIBIT 10.51
AMENDED AND RESTATED
ACCOUNTS RECEIVABLE CREDIT AGREEMENT
This Accounts Receivable Credit Agreement (the "Agreement") is made and
entered into this ___________________ day of May, 1997, by and between SANWA
BANK CALIFORNIA (the "Bank") and ELEXSYS INTERNATIONAL, INC. (the "Borrower") ,
on the terms and conditions that follow:
Whereas Bank and Borrower entered into an Accounts Receivable Credit
Agreement dated as of January 17, 1997, (the "Prior Agreement"); and
Whereas, Bank and Borrower wish to amend and restate the Prior
Agreement/
Now, therefore, the parties hereto agree as follows:
SECTION I
DEFINITIONS
1.01 Certain Defined Terms: Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):
(a) "Account Debtor": shall mean the person or entity
obligated to the Borrower upon an account.
(b) "Advance": shall mean an advance to the Borrower under the
Line of Credit.
(c) "Average Unused Portion of the Line of Credit": shall mean
for any quarter: (a) the Line of Credit less, (b) the average daily
balance of Advances under the Line of Credit that were outstanding
during that quarter less, (c) Letters of Credit.
(d) "Borrowing Base": shall mean, the lesser of: (i) 80% of
the aggregate amount of Eligible Accounts of the Borrower; or (ii)
$13,000,000, this is the total loan commitment.
(e) "Business Day": shall mean a day, other than a Saturday or
Sunday, on which commercial banks are open for business in California.
(f) "Collateral": shall mean the property described in Section
5.01.
(g) "Debt": shall mean all liabilities of the Borrower less
Subordinated Debt.
(h) "Effective Tangible Net Worth": shall mean the Borrower's
stated net worth plus Subordinated Debt less all intangible assets of
the Borrower (i.e., goodwill, trademarks, patents, copyrights,
organization expense and similar intangible items)..
(i) "Eligible Account": shall mean, at any time, the gross
amount, less returns, discounts, credits or offsets of any nature, of
the trade accounts owing to the Borrower by Account Debtors but
excluding the following:
(1) Accounts with respect to which the Account Debtor
is an officer, employee or agent of the Borrower.
(2) Accounts with respect to which goods are placed
on consignment, guarantied sale or other terms by reason of
which the payment by the Account Debtor may be conditional.
(3) Accounts with respect to which the Account Debtor
is not a resident of the United States except to the extent
such accounts are supported by adequate Eximbank insurance or
other insurance acceptable to the Bank or by irrevocable
letters of credit issued by banks satisfactory to the Bank,
and except in the case of United States Dollar denominated
invoices to Northern Telecom, or any of its Canadian
subsidiaries (collectively "Northern Telecom").
(4) Accounts with respect to which the Account Debtor
is the United States or any department or agency thereof.
(5) Accounts with respect to which the Account Debtor
is a subsidiary of, or affiliated with, the Borrower or its
shareholders, officers or directors.
(6) Net amount of accounts with respect to which the
Borrower is or may become liable to the Account Debtor for
goods sold or services rendered by the Account Debtor to the
Borrower.
(7) That portion of the accounts of any single
Account Debtor that exceeds 15% of all of the Borrower's
accounts, except for Northern Telecom which may not exceed 20%
of all of the Borrower's accounts.
(8) Accounts which have not been paid in full within
60 days from the date payment was due or 90 days from the
original date of invoice, whichever is less.
(9) All accounts of any single Account Debtor if 25%
or more of the dollar amount of all such accounts are
represented by accounts which have not been paid in full
within 60 days from the date payment was due or 90 days from
the original date of invoice, whichever is less.
(10) Accounts which are subject to dispute,
counterclaim or setoff.
(11) Accounts with respect to which the goods have
not been shipped or delivered, or the services have not been
rendered, to the Account Debtor.
(12) Accounts with respect to which the Bank, in its
reasonable sole discretion, deems the creditworthiness or
financial condition of the Account Debtor to be
unsatisfactory.
(13) Accounts of any Account Debtor who has filed or
had filed against it a petition in bankruptcy, or an
application for relief under any provision of any state or
federal bankruptcy, insolvency or debtor-in-relief acts; or
who has had appointed a trustee, custodian or receiver for the
assets of such Account Debtor; or who has made an assignment
for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such
debts become due.
(14) Accounts which represent credits or refunds due
to the Borrower's customers.
(j) "ERISA": shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, including (unless
the context otherwise requires) any rules or regulations promulgated
thereunder.
(k) "Event of Default": shall have the meaning set forth in
Section 9.
(l) "Expiration Date": shall mean January 31, 1998 or the date
of termination of the Bank's commitment to lend under this Agreement
pursuant to Section 8, whichever shall occur first.
(m) "Indebtedness": shall mean, with respect to the Borrower,
(i) all indebtedness for borrowed money or for the deferred purchase
price of property or services in respect of which the Borrower is
liable, contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which the Borrower otherwise assures a creditor
against loss and (ii) obligations under leases which shall have been or
should be, in accordance with generally accepted accounting principles,
reported as capital leases in respect of which the Borrower is liable,
contingently or otherwise, or in respect of which the Borrower
otherwise assures a creditor against loss.
(n) "Line of Credit": shall mean the credit facility described
in Section 2.
(o) "Obligations": shall mean all amounts owing by the
Borrower to the Bank pursuant to this Agreement including, but not
limited to, the unpaid principal amount of Advances.
(p) "Permitted Indebtedness": shall mean (i) Indebtedness of
Borrower in favor of Bank arising under this Agreement or any other
Loan Document; (ii) Indebtedness existing on the date hereof and
disclosed in writing to the Bank; (iii) Subordinated Debt; (iv)
Indebtedness to trade creditors, including, without limitation,
affiliates of Borrower, incurred in the ordinary course of business;
(v) Other Indebtedness of Borrower not exceeding $1,000,000.00 in the
aggregate outstanding at any time; (vi) Contingent obligations of
Borrowing consisting of guarantees (and other credit support) of the
obligations of vendors and suppliers of Borrower in respect of
transactions entered into in the ordinary course of business; (vii)
Indebtedness with respect to capital lease obligations and purchase
money indebtedness incurred in connection with the acquisition of
assets secured by Permitted Liens; (viii) Extensions, renewals,
refundings, refinancings, modifications, amendments and restatements of
any of the items of Permitted Indebtedness.
(q) "Permitted Investment": shall mean (i) investments
existing on the date hereof and disclosed in writing to the Bank; (ii)
marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof;
(iii)commercial paper maturing no more than one (1) year from the date
of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service,
Inc.; (iv) investments consisting of deposits maturing no more than one
(1) year from the date of investment therein issued by Bank; (v)
extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business; (vi) investments consisting of the
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; (vii)
investments, including debt obligations, received in connection with
the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business;
(viii) investments consisting of compensation of employees, officers
and directors of Borrower so long as the Board of Directors of Borrower
determines that such compensation is in the best interest of Borrower,
and travel advances, employee relocation loans and other employee loans
and advances in the ordinary course of business; (ix) other investments
aggregating not in excess of $250,000.00 at any time.
(r) "Permitted Liens": shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to the Bank; (ii)
liens for taxes, assessments or similar charges either not yet due or
being contested in good faith; (iii) liens of materialmen, mechanics,
warehousemen, or carriers or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money security
interests upon or in any property acquired or held by the Borrower in
the ordinary course of business to secure Indebtedness outstanding on
the date hereof or permitted to be incurred under Section 8.09 hereof;
(v) liens and security interests which, as of the date hereof, have
been disclosed to and approved by the Bank in writing; (vi) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of the
Borrower's assets; liens securing capital lease obligations on assets
subject to such capital leases; (vii) liens arising from judgments,
decrees or attachments to the extent and only so long as such judgment,
decree or attachment has not caused or resulted in an Event of Default,
(viii) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar liens affecting
real property not interfering in any material respect with the ordinary
conduct of the business of Borrower, (ix) liens in favor of customs and
revenue authorities arising as a mater of law to secure payment of
customs duties in connection with the importation of goods, (x) liens
arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a
creditor depository institutions; (xi) liens not otherwise permitted
which liens do not in the aggregate exceed $250,000.00 at any time.
(s) "Reference Rate": shall mean an index for a variable
interest rate which is quoted, published or announced from time to time
by the Bank as its reference rate and as to which loans may be made by
the Bank at, below or above such reference rate.
(t) "Subordinated Debt": shall mean such liabilities of the
Borrower which have been subordinated to those owed to the Bank in a
manner acceptable to the Bank including, but not limited to, that
certain Indenture dated as of February 15, 1987 between Borrower and
Manufacturers Hanover Trust Company, as trustee, with respect to the 5
1/2% Convertible Subordinated Debentures due March 1, 2012.
1.02 Accounting Terms: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03 Other Terms: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
SECTION 2
THE LINE OF CREDIT
2.01 The Line of Credit: On terms and conditions as set forth herein,
the Bank agrees to make Advances to the Borrower from time to time from the date
hereof to the Expiration Date, provided the aggregate amount of such Advances
outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, the Borrower may borrow, partially or wholly prepay, and reborrow under
this Section 2.01.
2.02 Making Line Advances: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to the
requirements of Section 6, Advances shall be made by the Bank upon telephonic or
written request in form acceptable to the Bank received from the Borrower, which
request shall be received not later than 2:00 p.m. (California time) on the date
specified for such Advance, which date shall be a Business Day. Requests for
Advances received after such time may, at the Bank's option, be deemed to be a
request for an Advance to be made on the next succeeding Business Day.
2.03 Mandatory Repayments:
(a) If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, the
Borrower hereby promises and agrees, immediately upon written or
telephonic notice from the Bank, to pay to the Bank an amount equal to
the difference between the outstanding principal balance of the
Advances and the Borrowing Base.
(b) On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount
of all Advances then outstanding, together with all accrued and unpaid
interest thereon.
2.04 Interest on Advances: Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the Borrower pursuant to paragraph 2.05 or paragraph 2.06
below:
(a) Variable Rate Advances: A variable rate per annum
equivalent to an index for a variable interest rate which is quoted,
published or announced from time to time by the Bank as its reference
rate and as to which loans may be made by the Bank at, below or above
such reference rate (the "Reference Rate") plus 0.50% (the "Variable
Rate"). Interest shall be adjusted concurrently with any change in the
Reference Rate. An Advance based upon the Variable Rate is hereinafter
referred to as a "Variable Rate Advance".
(b) Fixed Rate Advances: A fixed rate quoted by the Bank for
30, 60, or 90 days or for such other period of time that the Bank may
quote and offer (provided that any such period of time does not extend
beyond the Expiration Date) [the "Interest Period"] for Advances in the
minimum amount of $100,000 and in $50,000 increments thereafter. Such
interest rate shall be a percentage approximately equivalent to 2.50%
per annum in excess of the rate which the Bank determines in its sole
and absolute discretion to be equal to the Bank's cost of acquiring
funds (adjusted for any and all assessments, surcharges and reserve
requirements pertaining to the borrowing or purchase by the Bank of
such funds) in an amount approximately equal to the amount of the
relevant Advance and for a period of time approximately equal to the
relevant Interest Period (the "Fixed Rate"). Advances based upon the
Fixed Rate are hereinafter referred to as "Fixed Rate Advances".
Interest on any Advance shall be computed on the basis of 360 days per
year, but charged on the actual number of days elapsed.
Interest on Variable Rate Advances shall be paid in monthly
installments commencing on the first day of the month following the date of the
first such Advance and continuing on the first day of each month thereafter.
Interest on any Fixed Rate Advance shall be paid on the last day of the
Interest Period pertaining to such Fixed Rate Advance.
2.05 Notice of Election to Adjust Interest Rate: The Borrower may
elect:
(a) That interest on a Variable Rate Advance shall be adjusted
to accrue at the Fixed Rate; provided, however, that such notice shall
be received by the Bank no later than two business days prior to the
day (which shall be a business day) on which the Borrower requests that
interest be adjusted to accrue at the Fixed Rate.
(b) That interest on a Fixed Rate Advance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to commence to
accrue at the Variable Rate; provided, however, that such notice shall
be received by the Bank no later than two business days prior to the
last day of the Interest Period pertaining to such Fixed Rate Advance.
If the Bank shall not have received notice (as prescribed herein) of
the Borrower's election that interest on any Fixed Rate Advance shall
continue to accrue at the newly quoted Fixed Rate the Borrower shall be
deemed to have elected that interest thereon shall be adjusted to
accrue at the Variable Rate upon the expiration of the Interest Period
pertaining to such Advance.
2.06 Prepayment: The Borrower may prepay any Advance in whole or in
part, at any time and without penalty, provided, however, that: (i) any partial
prepayment shall first be applied, at the Bank's option, to accrued and unpaid
interest and next to the outstanding principal balance; and (ii) during any
period of time in which interest is accruing on any Advance on the basis of the
Fixed Rate, no prepayment shall be made except on a day which is the last day of
the Interest Period pertaining thereto. If the whole or any part of any Fixed
Rate Advance is prepaid by reason of acceleration or on a day which is not the
last day of the interest period pertaining thereto, the Borrower shall, upon the
Bank's request, promptly pay to and indemnify the Bank for all costs and any
loss (including interest) actually incurred by the Bank and any loss (including
loss of profit resulting from the re-employment of funds) sustained by the Bank
as a consequence of such prepayment.
2.07 Indemnification for Fixed Rate Costs: During any period of time in
which interest on any Advance is accruing on the basis of the Fixed Rate the
Borrower shall, upon the Bank's request, promptly pay to and reimburse the Bank
for all costs incurred and payments made by the Bank by reason of any future
assessment, reserve, deposit or similar requirement or any surcharge, tax or fee
imposed upon the Bank or as a result of the Bank's compliance with any directive
or requirement of any regulatory authority pertaining or relating to funds used
by the Bank in quoting and determining the Fixed Rate. Borrower shall not be
obligated to pay to or reimburse Bank for any reimbursable amounts which arose
or were incurred during or are otherwise attributable to any period of time more
than 180 days prior to the date on which Bank delivered its written statement
for indemnification or reimbursement of such reimbursable amounts.
2.08 Conversion from Fixed Rate to Variable Rate: In the event that the
Bank shall at any time determine that the accrual of interest on the basis of
the Fixed Rate (i) is infeasible because the Bank is unable to determine the
Fixed Rate due to the unavailability of U.S. dollar deposits, contracts or
certificates of deposit in an amount approximately equal to the amount of the
relevant Advance and for a period of time approximately equal to the relevant
Interest Period or (ii) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or order, or any
new interpretation of any present law, rule, regulation, guideline or order,
then the Bank shall give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event the Fixed Rate Advance, shall be deemed to be a
Variable Rate Advance and interest shall thereupon immediately accrue at the
Variable Rate.
2.09 Commitment Fee: The Borrower agrees to pay to Bank a commitment
fee of .25% per annum on the Average Unused Portion of the Line of Credit
payable quarterly in arrears and computed on a year of 360 days for actual days
elapsed.
2.10 Line Account:
(a) The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the Line
of Credit (the "Line Account"). The Bank shall provide the Borrower
with a monthly statement of the Borrower's Line Account, which
statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary
within 60 days after the Borrower's receipt of any such statement which
it deems to be incorrect, or unless there is a manifest error.
(b) The Borrower hereby authorizes the Bank, if and to the
extent payment owed to the Bank under the Line of Credit is not made
when due, to charge, from time to time, against any or all of the
Borrower's deposit accounts with the Bank any amount so due.
2.11 Late Payment: If any payment of principal (other than a principal
payment due pursuant to Section 2.03(b)) or interest, or any portion thereof,
under this Agreement is not paid within ten (10) calendar days after it is due,
a late payment charge equal to five percent (5%) of such past due payment may be
assessed and shall be immediately payable.
SECTION 3
LETTERS OF CREDIT SUBLIMIT
In addition to making Advances under the Line of Credit, the Bank
hereby agrees to make the following credit accommodations available to the
Borrower:
3.01 Letter of Credit Subfacility: The Bank agrees to issue commercial
and standby letters of credit (each a "Letter of Credit") on behalf of the
Borrower for general corporate purposes. At no time, however, shall the total
face amount of all Letters of Credit outstanding, less any partial draws paid by
the Bank, exceed the sum of $7,000,000 and, together with the total principal
amount of all Advances outstanding, exceed the Borrowing Base.
(a) Upon the Bank's request, the Borrower shall promptly pay
to the Bank standby letter of credit issuance fees of 1% per annum and
commercial letter of credit issuance fees of .25% and such other fees,
commissions, costs and any out-of-pocket expenses charged or incurred
by the Bank with respect to any Letter of Credit.
(b) The commitment by the Bank to issue Letters of Credit
shall, unless earlier terminated in accordance with the terms of the
Agreement, automatically terminate on the Expiration Date and no
commercial letter of credit shall expire on a date which is more than
90 days after the Expiration Date and no standby letter of credit shall
expire on a date after the Expiration Date.
(c) Each Letter of Credit shall be in form and substance
satisfactory to the Bank and in favor of beneficiaries satisfactory to
the Bank, provided that the Bank may refuse to issue a Letter of Credit
due to the nature of the transaction or its terms or in connection with
any transaction where the Bank, due to the beneficiary or the
nationality or residence of the beneficiary, would be prohibited by any
applicable law, regulation or order from issuing such Letter of Credit.
(d) Prior to the issuance of each Letter of Credit, but in no
event later than 10:00 a.m. (California time) on the day such Letter of
Credit is to be issued (which shall be a Business Day), the Borrower
shall deliver to the Bank a duly executed form of the Bank's standard
form of application for issuance of a Letter of Credit with proper
insertions.
(e) The Borrower shall, upon presentment of a Letter of Credit
or upon the Bank's request, promptly pay to and reimburse the Bank for
all draws under the Letters of Credit, costs incurred and payments made
by the Bank by reason of any future assessment, reserve, deposit or
similar requirement or any surcharge, tax or fee imposed upon the Bank
or as a result of the Bank's compliance with any directive or
requirement of any regulatory authority pertaining or relating to any
Letter of Credit.
SECTION 4
FOREIGN EXCHANGE FACILITY SUBLIMIT
4.01 Foreign Exchange Subfacility. Borrower may from time to time
request Bank to purchase or sell foreign currency in a specified amount, at a
fixed price, and for delivery at a future date no greater than 365 days from the
date of purchase (each a "Foreign Exchange Contract"). At no time, however,
shall 20% of the aggregate settlement price of all Foreign Exchange Contracts
outstanding exceed $2,000,000 as determined by Bank at the time of entering into
each Foreign Exchange Contract and, together with outstanding Advances and
issued and unexpired Letters of Credit, exceed the Borrowing Base.
(a) Requests for Foreign Exchange Contracts. Each request for
a Foreign Exchange Contract shall be made by telephone or rapifax,
confirmed in writing (each a "Request"). Each Request shall be
delivered or communicated to the Bank no later than 3:00 p.m.
(California time) on the day (which shall be a Business Day) on which
the Foreign Exchange Contract is requested. By making any such Request,
Borrower agrees that all matters relating to each such Foreign Exchange
Contract shall be governed by this Agreement and Borrower restates all
warranties and representations made by Borrower herein as if made on
the date the Foreign Exchange Contract is entered into.
(b) Expiration Date. The commitment by the Bank to enter into
Foreign Exchange Contracts shall, unless earlier terminated in
accordance with this Agreement, automatically terminate on the
Expiration Date and no Foreign Exchange Contract shall expire on a date
which is after the Expiration Date.
(c) Availability. Bank may refuse to enter into a Foreign
Exchange Contract with the Borrower where the Bank, in its sole
discretion, determines that such foreign currency is unavailable, or
where Bank would be prohibited by any applicable law, regulation or
order from purchasing such foreign currency.
(d) Purpose. The Foreign Exchange Contract shall be used to
hedge foreign exchange exposure and/or risk.
(e) Payment. Payment is due on the settlement date of any
Foreign Exchange Contract (the "Payment Date"). Bank is hereby
authorized by Borrower to charge the full settlement price of any
Foreign Exchange Contract against the depository account or accounts
maintained by the Borrower with Bank on the Payment Date.
(f) Assessments. Borrower shall, upon the Bank's request,
promptly pay to and reimburse the Bank for all costs incurred and
payments made by the Bank by reason of any assessment, reserve,
deposit, capital maintenance or similar requirement or any surcharge,
tax or fee imposed upon the Bank or as a result of the Bank's
compliance with any directive or requirement of any regulatory
authority pertaining or relating to any Foreign Exchange Contract.
SECTION 5
COLLATERAL
5.01 The Collateral: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property:
(a) All goods now owned or hereafter acquired by the Borrower
or in which the Borrower now has or may hereafter acquire any interest,
including, but not limited to, all machinery, equipment, furniture,
furnishings, fixtures, tools, supplies and motor vehicles of every kind
and description, and all additions, accessions, improvements,
replacements and substitutions thereto and thereof.
(b) Bank agrees to release its security interest in any
equipment, fixtures, leasehold improvements, or other property if
within ninety (90) days after Borrower acquires title to such property,
Borrower finances such property pursuant to either (i) a sale and
leaseback transaction or (ii) a debt financing transaction in an amount
not to exceed the purchase price of, and secured by a security interest
in such property.
(c) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in
process, finished goods, merchandise, parts and supplies of every kind
and description, including inventory temporarily out of the Borrower's
custody or possession, together with all returns on accounts.
(d) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but
not limited to, all receivables, goodwill, trademarks, trade styles,
trade names, patents, patent applications, software, customer lists and
business records.
(e) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.
(f) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its
agents' possession.
The Bank's security interest in the Collateral shall be a continuing
lien and shall include the proceeds and products of the Collateral including,
but not limited to, the proceeds of any insurance thereon.
SECTION 6
CONDITIONS OF LENDING
6.01 Conditions Precedent to the Initial Advance: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:
(a) Evidence that the execution, delivery and performance by
the Borrower of this Agreement and any document, instrument or
agreement required hereunder have been duly authorized.
(b) Such other evidence as the Bank may request to establish
the consummation of the transaction contemplated hereunder and
compliance with the conditions of this Agreement.
6.02 Conditions Precedent to All Advances: The obligation of the Bank
to make each Advance and each other extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:
(a) The Bank shall have received the documents set forth in
Section 8.06(e).
(b) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(c) Except as disclosed in writing to Bank, the
representations contained in Section 7 and in any other document,
instrument or certificate delivered to the Bank hereunder are correct.
(d) No event has occurred and is continuing which constitutes,
or, with the lapse of time or giving of notice or both, would
constitute an Event of Default.
(e) The security interest in the Collateral has been duly
authorized, created and perfected with first priority, assuming Bank
has timely filed and taken all actions necessary or desirable to
perfect and protect such security, and is in full force and effect.
The Borrower's acceptance of the proceeds of any Advance or the
Borrower's execution of any document or instrument evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.
SECTION 7
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank as of the date of this Agreement.
7.01 Status: The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.
7.02 Authority: The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(ii) result in a breach of or constitute a default under any material indenture
or loan or credit agreement or other material agreement, lease or instrument
to which the Borrower is a party or by which it or its properties may be bound
or affected; (iii) require any consent or approval of its stockholders or
violate any provision of its certificate of incorporation.
7.03 Legal Effect: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
7.04 Fictitious Trade Styles: There are no fictitious trade styles used
by the Borrower in connection with its business operations. The Borrower shall
notify the Bank within 30 days of effecting any change in the matters described
hereinor prior to using any other fictitious trade style at any future date,
indicating the trade style and state(s) of its use.
7.05 Financial Statements: All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein. Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
7.06 Litigation: Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties in excess of $500,000 before any court or administrative agency
which, if determined adversely to the Borrower, would have a material adverse
effect on the Borrower's financial condition or operations or on the Collateral.
7.07 Title to Assets: The Borrower has good and marketable title to all
of its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.
7.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
7.09 Taxes: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.
7.10 Accounts: Each Eligible Account represents a bona fide sale
conforming to the requirements of Section 1.01(i).
7.11 Environmental Compliance: The Borrower has implemented and
complied in all material respects with all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. There are no suits, proceedings, claims or disputes pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
its property claiming violations of any federal, state or local law, ordinance,
statute or regulation relating to hazardous or toxic wastes, substances or
related materials.
SECTION 8
COVENANTS
The Borrower covenants and agrees that, during the term of this
Agreement, and so long thereafter as the Borrower is indebted to the Bank under
this Agreement, the Borrower will, unless the Bank shall otherwise consent in
writing:
8.01 Preservation of Existence; Compliance with Applicable Laws:
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization; notwithstanding the foregoing Borrower may
liquidate or dissolve, or enter into any consolidation, merger, partnership,
joint venture or other combination, acquire any other business organization, or
acquire all or substantially all of the assets of any other person
(collectively, an "Acquisition"), so long as Borrower is in compliance with the
covenants contained in Section 8.14 immediately after such Acquisition; and
conduct its business and operations in accordance with all applicable laws,
rules and regulations.
8.02 Maintenance of Insurance: Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and
maintain such other insurance and coverages as may be required by the Bank. All
such insurance shall be in form and amount and with companies satisfactory to
the Bank. With respect to insurance covering properties in which the Bank
maintains a security interest or lien, such insurance shall name the Bank as
loss payee pursuant to a loss payable endorsement satisfactory to the Bank and
shall not be altered or canceled except upon 10 days' prior written notice to
the Bank. Upon the Bank's request, the Borrower shall furnish the Bank with the
original policy or binder of all such insurance.
8.03 Maintenance of Collateral and Other Properties: Except for
Permitted Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such levy, lien, encumbrance or security interest; comply with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute, file and record such statements, notices and agreements, take such
actions and obtain such certificates and other documents as necessary to
perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.
8.04 Payment of Obligations and Taxes: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.
8.05 Inspection Rights: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, at the
Borrower's expense, limited to $20,000 or at Bank's expense, the amount of which
shall be payable within five (5) days of written notice. In addition, the Bank
may, at any reasonable time and from time to time, conduct inspections and
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon five (5) days
prior written notice.
8.06 Reporting and Certification Requirements: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of (i) the annual audited financial
report of the Borrower for such year prepared by a firm of certified
public accountants reasonably acceptable to Bank, and (ii) the
Borrower's Form 10-K filed with the Securities Exchange Commission and
(iii) the Borrower's consolidating balance sheet and income statement
for such year; and, not later than 60 days after the end of each of the
Borrower's fiscal years, a copy of the Borrower's projected balance
sheet and income statement for the fiscal year then in effect.
(b) Not later than 45 days after the end of each of the
Borrower's fiscal quarters, a copy of the Borrower's Form 10-Q filed
with the Securities Exchange Commission and the Borrower's
consolidating balance sheet and income statement for such quarter for
the first three quarters only.
(c) Concurrently with the delivery of the financial reports
required hereunder, a compliance certificate in substantially the form
attached hereto as Exhibit "A", showing the calculations which would
demonstrate compliance with all of the financial covenants contained
herein.
(d) Not later than 30 days after the end of each month, an
aging of accounts receivable indicating separately the amount of
Eligible Accounts and the amount of total accounts receivable which are
current, 1 to 30 days past the date of invoice, 31 to 60 days past the
date of invoice, and the amount over 60 days past the date of invoice
and an aging of accounts payable indicating the amount of such payables
which are current, 1 to 30 days past the date of invoice, 31 to 60 days
past the date of invoice, and the amount over 60 days past the date of
invoice.
(e) Daily or at such other time as required by the Bank: (i) a
transaction report and schedule of accounts receivable which indicates
all sales made and all collections received for each such day; (ii) all
remittances and collections of accounts in
kind and without commingling to be applied to the payment of the
Borrower's Obligations on the next Business Day following receipt
thereof; provided, however, that if such amounts are received in a form
other than cash or bank wire, the Bank may withhold application of such
amounts for such time to the extent permitted by law as the Bank, in
its sole discretion, deems reasonable to allow for collection and
provided further that any remittances and collections received by the
Bank later than 2:30 p.m. (California time) on any day shall be deemed
received on the next succeeding Business Day; and (iii) clear and
legible copies of all invoices or sales receipts evidencing the sale of
goods or services by the Borrower.
(f) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder
as the Bank may reasonably request.
8.07 Payment of Dividends: Not declare or pay any dividends on any
class of stock now or hereafter outstanding except (i) dividends payable solely
in the Borrower's capital stock, or (ii) dividends approved by Bank.
8.08 Redemption or Repurchase of Stock: Not redeem or repurchase in
excess of 5% per year any class of the Borrower's stock now or hereafter
outstanding without prior written Bank approval.
8.09 Additional Indebtedness: Not, after the date hereof, create, incur
or assume, directly or indirectly, any additional Indebtedness other than (i)
indebtedness owed or to be owed to the Bank or (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business or (iii)
Permitted Indebtedness.
8.10 Loans: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) Permitted Investments.
8.11 Liens and Encumbrances: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.
8.12 Transfer Assets: Except for an amount not exceeding in the
aggregate $100,000 in any fiscal year, not, after the date hereof, sell,
contract for sale, convey, transfer, assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the ordinary course of
business as presently conducted by the Borrower and, then, only for fair and
reasonable consideration and (i) sales of inventory in the ordinary course of
business, (ii) transfer of assets in the ordinary course of business that have
become worn out or obsolete or that are promptly being replaced, (iii) transfers
of non-exclusive licenses and similar arrangements for the use of property of
Borrower made in the ordinary course of business, and (iv) transfers which
constitute liquidation of permitted investments.
8.13 Change in Nature of Business: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.
8.14 Financial Condition: Maintain at all times:
(a) A minimum Effective Tangible Net Worth of at least
$31,000,000 plus 50% of net profit after taxes at the end of each
fiscal quarter.
(b) A ratio of Senior Debt to Effective Tangible Net Worth of
not more than 1.5 to 1.
(c) A minimum working capital (defined as current assets minus
current liabilities) of not less than $5,000,000.
(d) A ratio of the sum of cash, cash equivalents and accounts
receivable to current liabilities of not less than .65 to 1.0
(e) A minimum net profit after tax of at least $1.00 at the
end of each fiscal quarter for the immediately preceding two (2) fiscal
quarters.
(f) Maintain a ratio of consolidated earnings before interest,
taxes, depreciation and amortization expense to the sum of (i) interest
expense and (ii) the current portion of long term Debt of not less than
2.00:1.00 at the end of each fiscal quarter for the immediately
preceding 4 fiscal quarters..
8.15 Compensation of Employees: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.
8.16 Capital Expense: Not make any fixed capital expenditure,
including, but not limited to, incurring liability for leases which would be, in
accordance with generally accepted accounting principles, reported as capital
leases, or purchase any real or personal property in an aggregate amount
exceeding $15,000,000 in any one fiscal year, exclusive of acquisition
financing, provided, however, that Borrower may make capital expenditures in
connection with acquisitions in an amount up to $3,000,000 in any one fiscal
year without the Bank's approval (subject to the terms and conditions of the
Term Loan Credit Agreement dated as of May __, 1997 between the Bank and the
Borrower.
8.17 Notice: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$500,000 or which affects the Collateral; and (iii) other matters which have
resulted in, or might result in a material adverse change in the Collateral or
the financial condition or business operations of the Borrower.
8.18 Environmental Compliance. The Borrower shall:
(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and
regulations with respect to hazardous or toxic wastes, substances or
related materials, industrial hygiene or to environmental conditions.
(b) Not own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or
materials, except in material compliance with all applicable federal,
state and local laws, ordinances, statutes and regulations.
(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, or filing respecting hazardous or toxic
wastes, substances or related materials.
(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of Borrower's use,
generation, manufacture, storage, handling, treatment, or disposal by
Borrower of hazardous or toxic wastes, substances or materials at the
site.
SECTION 9
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an
event of default (an "Event of Default") under this Agreement:
9.01 Non-Payment: The Borrower shall fail to pay any Obligations within
10 days of when due.
9.02 Performance Under This and Other Agreements: The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower (whether
such indebtedness is owed to the Bank or third persons), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument, document or agreement, which failure shall constitute and be
an Event of Default if not paid within 10 days of when due or when demanded to
be due) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.
9.03 Representations and Warranties; Financial Statements: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
9.04 Insolvency: The Borrower or any guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition;
(v) become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any receiver,
custodian or trustee, for itself or any of its properties, assets or businesses;
or (vii) any receiver, custodian or trustee shall have been appointed for all or
substantial part of its properties, assets or businesses and shall not be
discharged within 60 days after the date of such appointment.
9.05 Execution: Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 60 days after the issuance or
attachment of such writ or lien.
9.06 Suspension: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
9.07 Change in Ownership: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 25% of the issued and
outstanding capital stock of the Borrower, if a corporation, or there shall
occur a change in any general partner or a change affecting the control of the
Borrower, if a partnership.
SECTION 10
REMEDIES ON DEFAULT
Upon the occurrence and during the continuance of any Event of Default,
the Bank may, at its sole and absolute election, without demand and with prompt
subsequent notice to Borrower:
10.01 Acceleration: Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
10.02 Cease Extending Credit: Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into between the
Borrower and the Bank.
10.03 Termination: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank, the Bank's
obligations to the Borrower, or the Bank's or Borrower's rights and remedies
under this Agreement or under any other document, instrument or agreement.
10.04 Notification of Account Debtors:
(a) Notify any Account Debtor, any buyers or transferee of the
Collateral or any other persons of the Bank's interest in the
Collateral and the proceeds thereof.
(b) Sign the Borrower's name (which authority the Borrower
hereby irrevocably and unconditionally grants to the Bank) on any
invoice or bill of lading relating to accounts or other drafts against
the Account Debtors.
(c) Require the Borrower to indicate on the face of all
invoices (or such other documentation as may be specified by the Bank
relating to the sale, delivery or shipment of goods giving rise to the
account) that the account has been assigned to the Bank and that all
payments are to be made directly to the Bank at such address as the
Bank may designate.
10.05 Protection of Security Interest: Make such payments and do such
acts as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior to its security interest. Further, the Borrower hereby agrees
to pay to the Bank, upon demand therefor, all reasonable expenses and
expenditures (including reasonable attorneys' fees) incurred in connection with
the foregoing. Notwithstanding the foregoing, Bank shall be responsible for its
own gross negligence or willful misconduct.
10.06 Foreclosure: Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the Bank,
in its sole judgment, deems to be necessary or appropriate and the Borrower
hereby waives any and all rights, obligations or defenses now or hereafter
established by law relating to the foregoing. In the enforcement of its security
interest or lien, the Bank is authorized to enter upon the premises where any
Collateral is located and take possession of the Collateral or any part
thereof, together with the Borrower's records pertaining thereto, or the Bank
may require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank. The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto, giving
only such notices and following only such procedures as are required by law, at
either a public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its sole
judgment to be commercially reasonable. Any deficiency which exists after the
disposition or liquidation of the Collateral shall be a continuing liability of
the Borrower to the Bank and shall be paid by the Borrower to the Bank within
five (5) business days of written notice.
10.07 Foreign Exchange Contracts: The Bank may, at its sole and
absolute discretion and in addition to any other remedies available to it
hereunder or otherwise, require the Borrower to pay to the Bank within five (5)
business days of written notice, for application against the future settlement
price under any outstanding Foreign Exchange Contracts, the outstanding face
amount of any such Foreign Exchange Contracts which have not matured or settled
and Borrower hereby grants to Bank a security interest in and to such funds. Any
portion of the amount so paid to the Bank which is not subsequently applied to
satisfy repayment on any such matured Foreign Exchange Contracts or any other
obligations of the Borrower to the Bank shall be repaid to the Borrower without
interest.
10.08 Letters of Credit: The Bank may, at its sole and absolute
discretion and in addition to any other remedies available to it hereunder or
otherwise, require the Borrower to pay within five (5) business days of written
notice to the Bank, for application against drawings under any outstanding
Letters of Credit, the outstanding principal amount of any such Letters of
Credit which have not expired. Any portion of the amount so paid to the Bank
which is not applied to satisfy draws under any such Letters of Credit or any
other obligations of the Borrower to the Bank shall be repaid to the Borrower
without interest.
10.09 Non-Exclusivity of Remedies: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
10.10 Application of Proceeds: All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be applied
to the Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the Bank's
lien in the Collateral, including court costs and reasonable attorneys' fees,
whether or not suit is commenced by the Bank; next, to those costs and expenses
incurred by the Bank in protecting, preserving, enforcing, collecting,
liquidating, selling or disposing of the Collateral; next, to the payment of
accrued and unpaid interest on all of the Obligations; next, to the payment of
the outstanding principal balance of the Obligations; and last, to the payment
of any other indebtedness owed by the Borrower to the Bank. Any excess
Collateral or excess proceeds existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.
SECTION 11
MISCELLANEOUS
11.01 Amounts Payable on Demand: If the Borrower shall fail to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.
11.02 Default Interest Rate: The Borrower shall pay the Bank interest
on any indebtedness or amount payable under this Agreement, from the date that
such indebtedness or amount became due or was demanded to be due until paid in
full, at a rate which is 3% in excess of the rate otherwise provided under this
Agreement.
11.03 Disposal of Invoices: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 6
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.
11.04 Rights of the Bank on Default: Upon written notice from the Bank,
the Borrower agrees that the Bank may at any time and at its option, whether or
not the Borrower is in default:
(a) Require the Borrower to direct all Account Debtors to
forward all remittances, payments and proceeds of the Collateral
directly to the Bank at such address as the Bank may designate. In
connection therewith, the Borrower hereby
irrevocably constitutes and appoints the Bank as its attorney-in-fact
to endorse the Borrower's name on any notes, acceptances, checks,
drafts, money orders or other evidence of payment that may come into
the Bank's possession.
(b) Require the Borrower to deliver to the Bank, at such times
designated by the Bank, records and schedules which show the status and
condition of the Collateral, where it is located and such contracts or
other matters which affect the Collateral.
(c) Send verification requests to any Account Debtor.
(d) Make inquiries of the Borrower's trade vendors.
11.05 Indemnification: The Borrower agrees to hold the Bank harmless
from and indemnify and defend the Bank from any liability, claim, loss or
expense (including, but not limited to, reasonable attorneys' fees) arising from
any transaction between the Borrower and any Account Debtor including, but not
limited to, any loss, claim or liability arising from:
(a) Any violation of any federal or state consumer protection
law (including, but not limited to, the federal Truth-In-Lending Act)
and regulations promulgated thereunder.
(b) Improper collection practices or procedures of the
Borrower.
(c) Any unlawful acts taken by the Borrower in connection with
the collection of any account(s).
(d) Any suit by any person against the Bank resulting or
arising from such person's dealings with the Borrower.
11.06 Dispute Resolution. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement, or any
related agreements, documents, or instruments, (2) all past and present loans,
credits, accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods
or services, or other transactions, contracts or agreements of any kind, (3) any
incidents, omissions, acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable, in whole or in part, or (4) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step dispute
resolution process administered by Judicial Arbitration & Mediation Services,
Inc. ("J-A-M-S") as follows:
(a) Step I - Mediation: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the
nearest office of J-A-M-S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the J-A-M-S panel will seek to guide the
parties to a resolution of the case.
(b) Step II - Unsecured Contracts - Arbitration: Should any
dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase then all such remaining matters shall be
resolved by final and binding arbitration before a different judicial
panelist, unless the parties shall agree to have the mediator panelist
act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in San Jose County and shall be
administered by and in accordance with the then existing Rules of
Practice and Procedure of Judicial Arbitration & Mediation Services,
Inc., and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys fees and costs.
This subparagraph (b) shall apply only if, at the time of the
submission of the matter to J-A-M-S, the dispute(s) or issue(s) do(es)
not arise out of a transaction(s) which is/are secured by real property
collateral or, if so secured, all parties consent to such submission.
As soon as practicable after selection of the arbitrator, the
arbitrator or his/her designated representative shall determine a
reasonable estimate of anticipated fees and costs of the Arbitrator,
and render a statement to each party setting forth that party's
pro-rata share of said fees and costs. Thereafter each party shall,
within 10 days of receipt of said statement, deposit said sum with the
Arbitrator. Failure of any party to make such a deposit shall result in
a forfeiture by the non-depositing party of the right to prosecute or
defend the claim which is the subject of the arbitration, but shall not
otherwise serve to abate, stay or suspend the arbitration proceedings.
(c) Step II - Contracts Secured By Real Estate - Trial by
Court Reference [ss.638 (1)] Code of Civil Procedure): If the dispute,
claim or controversy is not one required or agreed to be submitted to
arbitration as provided by subparagraph (b) and has not been resolved
by Step I mediation, them any remaining dispute, claim or controversy
shall be submitted for determination by a trial on Order of Reference
conducted by a retired judge or justice from the panel of J-A-M-S
appointed pursuant to the provisions of California Code of Civil
Procedure ss.638(1) or any amendment, addition or successor section
thereto to hear the case and report a statement of decision thereon.
The parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If this parties are unable
to agree upon a member of the J-A-M-S panel to act as referee then one
shall be appointed by the Presiding Judge of the county wherein the
hearing is to be held. The parties shall pay in advance, to the
referee, the estimated reasonable fees and costs of the reference, as
may be specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the estimated
fees and costs of the reference. Failure of any party to make such a
fee deposit shall result in a forfeiture by the non-depositing party of
the right to prosecute or defend the cause(s) of action which is(are)
the subject of the reference, but shall not otherwise serve to abate,
stay or suspend the reference proceeding.
(d) Provisional Remedies, Self Help and Foreclosure: No
provision of, or the exercise of any right(s) under subparagraph (b),
nor any other provision of this Dispute Resolution Provision, shall
limit the right of any party to exercise self help remedies such as set
off, to foreclose against any real or personal property collateral, or
obtain provisional or ancillary remedies such as injunctive relief or
the appointment of a receiver from any court having jurisdiction
before, during or after the pendency of any arbitration. At Bank's
option, foreclosure under a deed of trust or mortgage may be
accomplished either by exercise of power of sale under the deed of
trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional remedies pursuit of
provisional or ancillary remedies or exercise of self help remedies
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration.
11.07 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.08 Reliance: Each warranty, representation, covenant, obligation and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.
11.09 Attorneys' Fees: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.
11.10 Notices: All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by Western Union
telegram, addressed as set forth below or to such other address as may be
specified from time to time in writing by either party to the other.
To the Borrower To the Bank:
ELEXSYS INTERNATIONAL, INC. SANWA BANK CALIFORNIA
4405 Fortran Court San Jose CBC
San Jose, CA 95134 220 Almaden Blvd.
San Jose, CA 95113
Attn: Robert DeLaurentis Attn: Jillian E. Mathur
Title: C.F.O. Vice President
with a copy to: With a copy to:
COOLEY GODWARD LLP SANWA BANK CALIFORNIA
Five Palo Alto Square Asset Based Financing Department
3000 El Camino Real
Palo Alto, CA 94306-2155 444 Market Street, 22nd Floor
San Francisco, CA 94111
Attn: Bill Veatch
11.11 Waiver: Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.
11.12 Conflicting Provisions: To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.
11.13 Binding Effect; Assignment: This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder. The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.
11.14 Jurisdiction: This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.
11.15 Headings: The headings herein set forth are solely for the
purpose of identification and have no legal significance.
11.16 Entire Agreement: This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are superseded
hereby.
11.17 Confidentiality Agreement. In handling any confidential
information Bank, and all employees and agents of Bank, including but not
limited to accountants, shall exercise the same degree of care that Bank
exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or
received pursuant to this Agreement except that disclosure of such information
may be made (i) to the subsidiaries or affiliates of Bank in connection with
their present or prospective business relations with Borrower; (ii) to
prospective transferees or purchasers of any interest in the loans, provided
that they have entered into a comparable confidentiality agreement in favor of
Borrower and have delivered a copy to Borrower; (iii) as required by law,
regulations, rule or order, subpoena, judicial order or similar order; (iv) as
may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.
Borrower Bank:
SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.
BY:_________________________________ BY:_______________________________
Name: Robert DeLaurentis Name: Jillian E. Mathur
Title: C.F.O. Title: Vice President