EXHIBIT 10.53
AMENDED AND RESTATED
TERM LOAN CREDIT AGREEMENT
This Term Loan 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 a Term Loan Credit Agreement dated
as of January 27, 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) "Business Day": shall mean a day, other than a Saturday or Sunday,
on which commercial banks are open for business in California.
(b) "Collateral": shall mean the property described in Section 3.01.
(c) "Debt": shall mean all liabilities of the Borrower less
Subordinated Debt.
(d) "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).
(e) "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.
(f) "Event of Default": shall have the meaning set forth in Section 7.
(g) "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.
(h) "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 the Term Loan, as hereinafter defined.
(i) "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
Accounts Receivable Credit Agreement - Page 1
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.
(j) "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.
(k) "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 6.09 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.
(l) "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.
(m) "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.
(n) "Term Loan": shall mean the credit facility described in Section
2.
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.
Accounts Receivable Credit Agreement - Page 2
SECTION 2
THE TERM LOAN
2.01 Term Loan. The Bank agrees to lend to the Borrower, upon the
Borrower's request therefor made prior to December 31, 1998, the lesser of 80%
of the appraised liquidation value of the Borrower's fixed assets or
7,000,000.00 (the "Term Loan").
A. Purpose. Proceeds under the Term Loan shall be used for business
acquisitions.
B. Interest. Interest shall accrue on the outstanding principal
balance of the Term Loan (the "Term Balance") at one of the following
rates, as quoted by the Bank and as elected by the Borrower:
1. Variable Rate Balance: 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 Bank at, below or above such reference
rate ("Reference Rate") plus 1.00% per annum. (the "Variable Rate").
Interest shall be adjusted concurrently with any change in the
Reference Rate. A Term Balance based upon the Variable Rate is
hereinafter referred to as a "Variable Rate Balance".
2. Cost of Funds Balance: At the Borrower's election, at a fixed
rate for such period of time that the Bank may quote and offer,
provided that any such period of time shall be for at least 30 days
and shall not extend beyond the maturity date (the "Cost of Funds
Interest Period") for the Term Balance. Such interest rate shall be a
percentage approximately equivalent to three percent (3.00 %) 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 equal to the amount of the Term Balance and
for a period of time approximately equal to the relevant Interest
Period (the "Cost of Funds Rate" or the "Fixed Rate"). Term Balances
based upon the Cost of Funds or Fixed Rate are hereinafter referred to
as "Cost of Funds Balances" or "Fixed Rate Balances".
Interest shall be computed on the basis of 360 days per year, but
charged on the actual number of days elapsed. The Borrower hereby promises and
agrees to pay the Bank interest monthly, commencing on May 31, 1997 and
continuing on the last day of each month thereafter to and including January 31,
2001. If interest is not paid as and when it is due it shall be added to and
become and be treated as part of principal, and the amount of such unpaid
interest shall bear interest, until paid in full, at the then applicable
interest rate.
(a) Notice of Election to Adjust Interest Rate. Upon telephonic notice
which shall be received by the Bank at or before 11:00 a.m. (California
time) on a business day, the Borrower may elect:
(1) That interest on a Variable Rate Balance 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.
(2) That interest on a Fixed Rate Balance 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
Balance. If the Bank shall not have received notice as prescribed
herein of the Borrower's election that interest on any Fixed Rate
Balance shall continue to accrue at the 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 Term Balance.
(b) Prohibition Against Prepayment of Fixed Rate Balances.
Notwithstanding anything to the contrary in the Agreement, no prepayment
shall be made on any Fixed Rate Balance 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 Balance is prepaid by reason of acceleration or otherwise,
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. Borrower shall not be obligated to pay to or reimburse Bank for
any reimbursable
Accounts Receivable Credit Agreement - Page 3
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.
(c) 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 Term Balance 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 any Fixed Rate Term Balance shall be deemed to be a Variable Rate
Term Balance and interest shall thereupon immediately accrue at the
Variable Rate. Interest on any Term Balance shall be computed on the basis
of 360 days per year, but charged on the actual number of days elapsed.
C. Principal. The Borrower hereby promises and agrees to pay principal
in 36 equal installments commencing on January 31, 1998, and continuing on
the last day of each month thereafter up to and including December 31,
2000. On January 31, 2001, the Borrower hereby promises and agrees to pay
to the Bank the entire unpaid principal balance, together with accrued and
unpaid interest.
Each payment received by the Bank shall, at the Bank's option, be applied
to pay interest then due and unpaid and the remainder thereof (if any) shall be
applied to pay principal.
D. Term Loan Account.
(a) The Bank shall maintain on its books a record of account in which
the Bank shall make entries for each drawing under the Term Loan and such
other debits and credits as shall be appropriate in connection with the
Term Loan (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 Term Loan 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.
E. Late Payment: If any payment of principal (other than a principal
payment due on January 31, 2001) 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.
1.03 Disbursement of Proceeds from Loan. Any loan made hereunder shall be
conclusively presumed to have been made to and for the Borrower's benefit when
the proceeds of such loan are disbursed in accordance with the Borrower's
instructions or deposited into a checking account of the Borrower maintained at
the Bank.
SECTION 3
COLLATERAL
3.01 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.
Accounts Receivable Credit Agreement - Page 4
(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 4
CONDITIONS OF LENDING
4.01 Conditions Precedent : The obligation of the Bank to make 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 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) Except as disclosed in writing to Bank, the representations
contained herein and in any other document, instrument or certificate
delivered to the Bank hereunder are correct.
(c) 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.
(d) 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.
SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank as of the date of this Agreement.
5.01 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.
5.02 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.
Accounts Receivable Credit Agreement - Page 5
5.03 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.
5.04 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.
5.05 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.
5.06 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.
5.07 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.
5.08 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.
5.09 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.
5.10 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 6
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:
6.01 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 6.14 immediately after such Acquisition; and conduct its
business and operations in accordance with all applicable laws, rules and
regulations.
6.02 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
Accounts Receivable Credit Agreement - Page 6
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.
6.03 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.
6.04 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.
6.05 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.
6.06 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
first three 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
(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) 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.
6.07 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.
6.08 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.
6.09 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.
Accounts Receivable Credit Agreement - Page 7
6.10 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.
6.11 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.
6.12 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.
6.13 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.
6.14 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 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..
6.15 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.
6.16 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.
6.17 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.
6.18 Environmental Compliance. The Borrower shall:
Accounts Receivable Credit Agreement - Page 8
(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 7
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:
7.01 Non-Payment: The Borrower shall fail to pay any Obligations within 10
days of when due.
7.02 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.
7.03 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.
7.04 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.
7.05 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.
7.06 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.
7.07 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 8
REMEDIES ON DEFAULT
Accounts Receivable Credit Agreement - Page 9
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:
8.01 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.
8.02 Cease Extending Credit: Cease 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.
8.03 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.
8.04 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.
8.05 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.
8.06 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.
8.07 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 9
MISCELLANEOUS
9.01 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.
Accounts Receivable Credit Agreement - Page 10
9.02 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.
9.03 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
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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.
9.04 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.
9.05 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.
9.06 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.
9.07 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
9.08 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.
Accounts Receivable Credit Agreement - Page 12
9.09 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.
9.10 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.
9.11 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.
9.12 Headings: The headings herein set forth are solely for the purpose of
identification and have no legal significance.
9.13 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.
9.14 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.
Accounts Receivable Credit Agreement - Page 13
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