EXHIBIT 10.50
BUSINESS LOAN AGREEMENT
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ELECTRONIC ASSOCIATES, INC.
BUSINESS LOAN AGREEMENT
This Business Loan Agreement made this 8th day of September,
1994, by and between Electronic Associates, Inc., a New Jersey corporation with
offices at 185 Monmouth Parkway, West Long Branch, New Jersey 07764-9989
("Lender") and Tanon Manufacturing, Inc., a California corporation with offices
at 46360 Fremont Boulevard, Fremont, California 94538-6406 ("Borrower").
ARTICLE I. DEFINITIONS
"Closing" or "Closing Date" means the date hereof or , 1994.
"Collateral" means all tangible and intangible personal property held
by the Borrower for use primarily in business as more fully set forth in the
Security Agreement of even date herewith.
"GAAP" means generally accepted accounting principles as set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board as the same shall
exist from time to time.
"Guaranty" means that certain Guaranty of even date herewith executed
by Joseph Spalliero and his wife, Patricia Spalliero, which Guaranty is secured
by a pledge of the stock held by Joseph and Patricia Spalliero in Tanon
Manufacturing, Inc.
"Indebtedness" means all amounts of principal, interest, fees, expenses
or other costs owed Lender by Borrower arising under or in connection with this
Business Loan Agreement or any other Loan Document including, but not limited
to, costs and expenses of collection and any amounts incurred by Lender, in its
discretion, to maintain or protect any Collateral or other property securing a
Loan.
"Lease Payments" means any direct or indirect payments or payments
whether as rent or otherwise, including fees, service or finance charges, under
any capital or operating lease, rental or other arrangement for the use of
property of any other person and whether or not there is an option to purchase.
"Loan" means the sum which Lender agrees to lend to Borrower as
specified in Section 2.1 of this Business Loan Agreement and pursuant to the
terms and provisions hereof.
"Loan Documents" means this Business Loan Agreement and each other
document delivered pursuant to this Business Loan Agreement including, but not
limited to, the Note and any security agreement, pledge agreement, guaranty or
assignment of rents and leases.
"Note" means the promissory note executed by Borrower
hereunder to evidence the Loan.
"Officer Compensation" means the annualized aggregate amount of
salaries, withdrawals or compensation paid to the Chief Executive Officer,
President, Chief Financial Officer, Secretary and Vice-Presidents of Borrower,
such amount to be determined as of the Closing Date.
"Pledge Agreement" means that certain Pledge Agreement of even date
herewith executed by Joseph Spalliero and his wife, Patricia Spalliero, pursuant
to which Joseph Spalliero and Patricia Spalliero pledged stock held in Tanon
Manufacturing, Inc. as security for the Guaranty.
"Prime Rate" means that rate of interest per annum announced by
Congress Financial Corporation from time to time as its "prime rate" which may
represent the lowest rate charged by Congress Financial Corporation to other
borrowers, or to any class of borrowers, at any time, or from time to time.
"RICO" means the Racketeer Influenced and Corrupt Organization Act, as
amended by the Comprehensive Act of 1984, 18 USC Sections 1961- 68.
"Security Agreement" means that certain Security Agreement of even date
herewith by and between Lender and Borrower pursuant to which Borrower grants a
security interest in all of Borrower's Collateral as security for the Loan.
"Term" means the period of time commencing on the Closing Date and
ending on the Termination Date.
"Termination Date" means the earlier of (i) the date on which Lender
demands payment of the Loan or (ii) March 1, 1995, unless extended by the mutual
consent of Lender and Borrower.
"Unmatured Event of Default" means any event which with the passage of
time or giving of notice, or both, could become an Event of Default.
ARTICLE II. THE LOAN
2.1 Under and subject to the terms and provisions hereof
Lender agrees to lend to Borrower the sum of One Million Dollars
($1,000,000.00).
2.2 The entire outstanding principal balance of the Loan,
together with all accrued and unpaid interest thereon, shall be due and payable
by Borrower to Lender on the earlier of the 30th day following written demand
for payment by Lender or March 1, 1995.
2.3 The Loan shall bear interest at the rate of the Prime
Rate plus 2.25%. Interest on the unpaid balance of principal shall be computed
on a 365 day basis and the actual number of days elapsed. The variable interest
rate shall change when and as the Prime Rate changes.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower makes the following representations and warranties,
both with respect to itself and all subsidiaries of Borrower, to Lender:
3.1 Borrower is and on the Closing Date will be a corporation
duly organized, validly existing and in good standing as such under the laws of
the state in which it is organized and is and on the Closing Date will be
entitled to own its properties and conduct its business in the places where such
properties are now owned and such business is now conducted.
3.2 Neither the execution nor delivery of this Agreement or
any other Loan Document nor the fulfillment or compliance with the terms and
conditions hereof or thereof will conflict with or result in a breach of or
constitute a default under the terms, conditions or provisions, of Borrower's
charter documents or By-Laws or of any contract, agreement or instrument
(including any provisions of any debt) to which Borrower is a party or by which
Borrower or any of its properties is bound.
3.3 All corporate action on the part of Borrower, its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Loan Documents has been duly
and properly taken; and Borrower intends that this Agreement and the Loan
Documents shall be valid and binding obligations of Borrower enforceable against
Borrower in accordance with its and their terms.
3.4 The proceeds of the Loan made hereunder shall be used by
Borrower exclusively for working capital and for no other purpose. Borrower's
business operations are the contract manufacturing of electronic circuit boards
and computer components.
3.5 There are no actions, suits or proceedings pending, or
threatened against Borrower or its property by or before any court or
administrative agency. Borrower has complied in all material respects with all
laws, rules and regulations relating to the conduct of Borrower's business
including, but not limited to, those applying to the use, storage or disposal of
hazardous waste or toxic materials and RICO.
3.6 No debt of Borrower is now or at Closing will be in
default under the provisions thereof.
3.7 All of Borrower's financial statements furnished to Lender
were prepared in accordance with GAAP consistently applied, are true and correct
and fully and accurately present Borrower's financial condition and results of
operations at and for the periods therein specified; and there has been and on
the Closing Date hereunder there will have been no material adverse change in
the conditions, financial or otherwise, of Borrower since the date of the last
financial statement provided to Lender, other than normal seasonal variations
occurring in the ordinary course of business.
3.8 Borrower is not engaged principally, or as one of
Borrower's important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meanings of
Regulations T, U and X of the Board of Governors of the Federal Reserve System).
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF LENDER
4.1 Lender is and on the Closing Date will be a corporation
duly organized, validly existing and in good standing as such under the laws of
the state in which it is organized and is and on the Closing Date will be
entitled to own its properties and conduct its business in the places where such
properties are now owned and such business is now conducted.
4.2 Neither the execution nor delivery of this Agreement or
any other Loan Document nor the fulfillment or compliance with the terms and
conditions hereof or thereof will conflict with or result in a breach of or
constitute a default under the terms, conditions or provisions, of Borrower's
charter documents or By-Laws or of any contract, agreement or instrument
(including any provisions of any debt) to which Borrower is a party or by which
Borrower or any of its properties is bound.
4.3 All corporate action on the part of Lender, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Loan Documents has been duly and
properly taken; and this Agreement and the Loan Documents constitute valid and
binding obligations of Lender enforceable against Lender in accordance with its
and their terms.
4.4 Except as set forth on Exhibit "A" hereto, there are no
actions, suits or proceedings pending, or threatened against Lender or its
property by or before any court or administrative agency. Lender has complied in
all material respects with all laws, rules and regulations relating to the
conduct of Lender's business including, but not limited to, those applying to
the use, storage or disposal of hazardous waste or toxic materials and RICO.
4.5 Lender acknowledges that Lender has reviewed Borrower's
business records including financial statements of Borrower.
ARTICLE V. SECURITY
5.1 The Loan shall be secured by all of the Borrower's
Collateral as more fully set forth in the Security Agreement and Borrower will
comply with all terms, conditions and provisions set forth in the Security
Agreement.
5.2 The Loan shall be guarantied by Joseph Spalliero and his
wife, Patricia Spalliero (the "Spallieros"), as set forth in the Guaranty, which
Guaranty shall be secured by the Spallieros' pledge of the stock they hold in
Tanon Manufacturing, Inc. pursuant to the Pledge Agreement, and Borrower will
comply with all terms, conditions and provisions set forth in the Guaranty and
the Pledge Agreement.
ARTICLE VI. CONDITIONS TO CLOSING.
6.1 As conditions precedent to the performance by Lender of
any of its obligations hereunder, Borrower shall deliver to Lender, on or before
the Closing Date, in form and substance satisfactory to Lender, in addition to
this Business Loan Agreement: (i) the Note; (ii) the Security Agreement; (iii)
the Pledge Agreement; (iv) the Guaranty; (v) Opinion of Borrower's Counsel in a
form acceptable to Lender's Counsel; (vi) Incumbency Certificate of Borrower;
(vii) Certified Copy of Borrower's Articles of Incorporation and By-Laws; (viii)
Certified Copy of Borrower's Authorizing Board of Directors' Resolutions; (ix)
Financing Statements on Forms UCC-1; (x) Lien Searches; (xi) Landlord or
Mortgagee Waiver; (xii) Insurance Certificates with Lender as additional Loss
Payee; and (xii) Such other documents as Lender shall require.
ARTICLE VII. BORROWER'S AFFIRMATIVE COVENANTS.
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During the Term hereof, Borrower agrees to:
7.1 Furnish Lender within 45 days after the close of each
fiscal quarter, a balance sheet as of the close of such quarter and an operating
statement and statement of cash flows for such quarter, each prepared in
accordance with GAAP consistently applied, and certified as accurate by an
authorized officer of Borrower who shall also certify that this Business Loan
Agreement is not in default by its terms. Upon written request of Lender,
Borrower will provide this information in consolidating, as well as consolidated
form;
7.2 Furnish Lender within 90 days after the close of each
fiscal year audited annual financial statements including a statement of cash
flows and an operating statement for the fiscal year and a balance sheet as of
the close of the fiscal year, prepared in accordance with GAAP consistently
applied, reviewed by a certified public accountant satisfactory to Lender. Upon
written request of Lender, Borrower will provide this information in
consolidating as well as consolidating form. Borrower shall furnish to Lender,
together with such annual financial statement, a certificate of non-default, in
form and substance satisfactory to Lender, executed by such accounting firm and
the president or general partner of Borrower;
7.3 Make available for inspection to a duly authorized
representative of Lender any of Borrower's (and Borrower's subsidiaries') books
and records when requested to do so and to furnish Lender any information
regarding Borrower's (and Borrower's subsidiaries') business affairs and
financial condition within a reasonable time after written request by Lender
therefor and provide Lender with all annual and quarterly reports, proxy
statements, and other reports sent to such stockholders of Borrower at the time
such reports are sent to stockholders;
7.4 Keep Collateral insured against such casualties as Lender
shall reasonably require, provided that the amount of such insurance shall not
exceed the replacement value of the Collateral. All insurance policies shall be
written for the benefit of the Borrower as the insured, and shall name the
Lender as loss payee, and such policies shall be delivered to and held by the
Lender. All such policies shall provide for at least ten days' advance notice in
writing to the Lender of any cancellation thereof, and shall insure Lender
notwithstanding the act or neglect to act of Borrower. If the Borrower fails to
pay the premiums on any such insurance, the Lender shall have the right (but
shall be under no obligation) to pay such premiums for the Borrower's account.
The Borrower shall repay to the Lender any sums which the Lender shall have so
paid. The Borrower hereby assigns to the Lender any return or unearned premium
which may be due upon cancellation of any such policies for any reason
whatsoever and directs the insurers to pay to the Lender any amounts so due;
7.5 Maintain Collateral in good condition and repair, and will
pay the cost of repairs to or maintenance of the same and will not permit
anything to be done that may impair the value of the Collateral;
7.6 Promptly notify the Lender of any event causing
deterioration, loss or depreciation in value of any substantial portion of the
Borrower's Collateral and the amount of such loss or depreciation. The Borrower
shall permit the Lender's agents to have access to its Collateral from time to
time, as requested by the Lender, for purposes of examination, inspection, and
appraisal thereof and verification of the Borrower's records pertaining thereto.
Upon demand by the Lender, and upon default by the Borrower, the Borrower shall
permit Lender's agents access to the Collateral at such time designated by the
Lender which is reasonably convenient to both parties; and
7.7 Pay (and to require subsidiaries to pay) all taxes,
assessments and other governmental charges, provided, however, that nothing
herein contained shall be interpreted to require Borrower to pay any tax so long
as its validity is contested in good faith and adequate reserves are maintained
therefor.
ARTICLE VIII. BORROWER'S NEGATIVE COVENANTS.
During the term of this Agreement, and so long as any part of
the Indebtedness shall remain unpaid, Borrower and its subsidiaries will not
without the prior written consent of Lender:
8.1 Create or permit to exist against any properties or
assets, real or personal, tangible or intangible, now or hereafter acquired, any
mortgage, security interest, or other lien or encumbrance, other than those
granted pursuant to this Business Loan Agreement, except for: deposits or
pledges in connection with or to secure statutory obligations, surety or appeal
bonds; or payment of workmen's compensation, unemployment insurance, old age
pension or other social security; or any lien for taxes or governmental charges
not overdue and payable; or any lien of the kinds normally incident to and
resulting from the usual operations of the business in which Borrower is engaged
and securing claims not overdue and payable;
8.2 Purchase or acquire all or substantially all of the
property, assets or business of any other person, firm or
corporation;
8.3 Purchase or acquire, directly or indirectly, any shares of
stock, evidences of indebtedness or other securities of any person, firm
partnership, or corporation (including a subsidiary) other than direct
obligations of Lender or an affiliate
of Lender or the U.S. Government and except in settlement of
customers' accounts;
8.4 Liquidate, or discontinue its normal operations with
intention to liquidate, or merge or consolidate with or into any other
corporation or company other than Lender or a subsidiary of Lender (including a
parent or subsidiary company), or convey, lease or sell all or substantially all
of its property, assets or business to any other person, firm or corporation;
8.5 Create or incur any indebtedness for borrowed money,
including the sale of commercial paper, except;
(i) as provided under this Agreement;
(ii) existing indebtedness as disclosed on Schedule 8.5
(ii) attached hereto;
8.6 Sell, assign, transfer or dispose of any of its
accounts or notes receivable, with or without recourse, except to
Lender;
8.7 Make loans or advances to others;
8.8 Become a guarantor, surety or otherwise liable for the
debts or obligations of others, except to Lender, and except as an endorser of
checks or drafts negotiated in the ordinary course of business;
8.9 Declare or pay any dividends or make any form of
withdrawal from capital, including the purchase of treasury stock;
8.10 Incur, create or assume any commitment to make any Lease
Payments except as set forth on Schedule 7.10 attached hereto;
8.11 Enter into any sale-leaseback transaction;
8.12 Prepay any amounts not required or cause to be
accelerated any amounts on any outstanding indebtedness now existing or
hereafter arising, except to Lender;
8.13 Pay salaries, withdrawals or compensation to
officers of Borrower in an amount exceeding Officer Compensation in
the aggregate per year;
8.14 Make capital expenditures during any one fiscal year in
an amount in excess of One Hundred Thousand Dollars ($100,000.00);
8.15 Sell, issue, or agree to sell or issue, any shares
(voting, non-voting, preferred or common of any class) of Borrower,
or purchase such shares except (i) with respect to the exercise of stock options
outstanding as of the Closing Date or (ii) under such circumstances as will in
the opinion of Lender not result in a material adverse change in the financial
condition of Borrower or the value of any security held by Lender or unfavorably
alter the control of Borrower; or
8.16 Sell or otherwise dispose of its Collateral, except
in the ordinary course of business.
ARTICLE IX. OPPORTUNITY TO CURE DEFAULT.
Upon the occurrence of an Event of Default (as defined in
Article IX. hereof), Lender shall provide written notice (the "Default Notice")
to Borrower of such Event of Default stating the grounds for such default and
referencing the section(s) of this Business Loan Agreement and/or any Loan
Documents related to such default. During the fifteen-day period following such
written notice (the "Cure Period"), Borrower shall have the opportunity to cure
or correct such Event of Default. In the event the Borrower fails to cure the
Event of Default to the reasonable satisfaction of Lender within the Cure
Period, Borrower shall be in default under this Business Loan Agreement.
ARTICLE X. DEFAULT.
Borrower shall be in default (an "Event of Default") under
this Business Loan Agreement and under the Note, and the other Loan Documents
upon the expiration of the Cure Period, provided that during the Cure Period
such Event of Default is not cured or corrected as provided in Article IX.
hereof, whereupon Lender, at its option, may declare immediately due and
payable, the unpaid balance of the Loan and may exercise all rights and remedies
provided to Lender in this Business Loan Agreement, in the Note, and any other
Loan Document or otherwise available to Lender in law or in equity, including,
but not limited to, Lender's right to set off against any account of any
Borrower or any guarantor or surety for Borrower with Lender:
10.1 Borrower's failure to pay Lender the principal, interest
or other liabilities incurred pursuant to this Business Loan Agreement or any
other Loan Document when the same is due and payable;
10.2 Borrower's failure to observe, perform or comply with any
of Borrower's obligations under this Business Loan Agreement;
10.3 Any warranty or representation of Borrower set
forth herein being or becoming untrue;
10.4 Any default by Borrower or by any guarantor or
surety for Borrower under the provisions of the Note, or any other
Loan Document;
10.5 The determination by an officer of Lender, in such
officer's reasonable judgment, that a material adverse change in the business or
financial condition of Borrower, or of any guarantor or surety for Borrower, has
occurred;
10.6 The default by Borrower with respect to any obligation of
Borrower to Lender or of Borrower to any person, firm or corporation extending
credit or loans to Borrower; or
10.7 The filing by or against Borrower or any guarantor or
surety for Borrower of any proceeding under the Federal Bankruptcy Code or under
any other Federal or State law relating to insolvency, receivership,
reorganization or debt adjustment, or the appointment of a trustee or receiver
for the property of, or assignment for the benefit of creditors by, Borrower or
any guarantor or surety for Borrower.
ARTICLE XI. MISCELLANEOUS.
11.1 Lender shall not be deemed to have waived any of the
terms, agreements, conditions and covenants hereof, except by a writing signed
by an officer of Lender and delivered to Borrower.
11.2 Borrower will pay all costs of filing of any financing,
continuation or termination statements; mortgages, or suretyship agreements with
respect to the security interest created pursuant to this Business Loan
Agreement; Borrower will pay any stamp taxes or taxes in the nature thereof
which may be payable in connection with the execution of delivery of the Loan
Documents.
11.3 Borrower hereby forever indemnifies and saves Lender and
its directors, officers, employees and agents harmless from and against any and
all liability which Lender or any of them may incur or which may be assessed
against Lender or any of them with respect to this Business Loan Agreement or
any other Loan Document, provided that such liability is not due to the
negligence or intentional acts of or on the part of the Lender or any of its
directors, officers, employees or agents.
11.4 This Business Loan Agreement contains the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior or contemporaneous agreements with
respect to such subject matter. The terms of any other Loan Documents are
expressly incorporated herein and made a part hereof; provided, however, that in
any case where a term or condition contained in any other Loan Document cannot
be construed (despite every effort to do so) as consistent
with the terms of this Business Loan Agreement, this Business Loan Agreement
shall govern. This Business Loan Agreement may be amended only by a written
instrument which is signed by the parties hereto and which specifically refers
to this Business Loan Agreement and states that it is an amendment hereto.
11.5 This Business Loan Agreement and all rights hereunder
shall be governed by the laws of the Commonwealth of Pennsylvania and shall be
binding upon Borrower, its successors and assigns, and shall inure to the
benefit of Lender, and its successors and assigns.
11.6 If any term of this Business Loan Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby.
11.7 This Business Loan Agreement shall be in full force and
effect until Borrower shall have satisfied in full or been released from all of
Borrower's liabilities and obligations to Lender hereunder and Lender shall have
no further obligations to Borrower pursuant to the terms hereof.
11.8 Any and all actions at law or in equity relating to this
Business Loan Agreement, the Note, any other Loan Documents or the Loan shall be
brought, and jurisdiction shall be had exclusively, in the courts of
Philadelphia County, Pennsylvania or the United States District Court for the
Eastern District of Pennsylvania, provided that any action involving the
Collateral may be brought in any jurisdiction in which any of the Collateral is
located. BORROWER AND LENDER EACH EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY CASE BROUGHT BY ANY PARTY WITH RESPECT TO THIS BUSINESS LOAN AGREEMENT, THE
NOTE, ANY OTHER LOAN DOCUMENT OR THE LOAN.
11.9 If Borrower shall pay any interest under the terms of the
Note at a rate higher than the maximum rate allowed by applicable law, then such
excess payment shall be credited as a payment of principal of the Loan, unless
Borrower notifies Lender in writing to return any excess payment to Borrower.
11.10 Any notices required or permitted to be given pursuant
to this Business Loan Agreement or any Loan Document shall be sufficiently given
if delivered in person or by overnight delivery service or sent by United States
mail, postage prepaid to the addresses set forth on the first page hereof.
11.11 Until the Indebtedness has been paid in full and Lender
has no further obligations to Borrower hereunder, Lender shall have the right of
first refusal to offer loans to Borrower of all types (including capital leases)
and Borrower shall promptly deliver to Lender a copy of all commitment letters
or proposals received by Borrower with respect thereto. Lender shall have 10
days after receipt of each such commitment letter or proposal to exercise the
right of first refusal granted hereby.
11.12 This Business Loan Agreement may be executed on one or
more counterparts and all such counterparts shall together constitute one
Business Loan Agreement notwithstanding that all of the parties are not
signatories to the original or same counterpart.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Business Loan Agreement this 8th day of
September, 1994.
Attest ELECTRONIC ASSOCIATES, INC.
_________________________ By: /s/ Charles A. Milo
Secretary
Attest TANON MANUFACTURING, INC.
_________________________ By: /s/ Joseph R. Spalliero
Secretary
EXHIBIT "A"
Litigation
*Lender is a not a party, but a directive order recipient, to
the two following actions:
Rollins Environmental Services (NJ) Inc., et al. v. United
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States, et. al., Civil Action No. 92-1253 (JEI);
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United States v. Allied Signal Inc., et al., Civil Action No.
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92-2726 (JEI)
*Lender was served in August 1988 with a complaint filed in Superior
Court of New Jersey for Middlesex County on behalf of Marie Vassalo individually
and as administratrix of Charles Vassalo. Lender, five identified asbestos
manufacturers, and other unidentified "John Doe" defendants were named in the
complaint which alleges that as an employee of AT&T from 1966 to 1986, including
an unspecified period as an employee at the premises rented by AT&T from Lender,
the AT&T employee was exposed to asbestos products and, as a result, sustained
severe personal injury and death.
*The following action was instituted in the Law Division of the
Superior Court of New Jersey, Monmouth County in October 1992:
Lemco Associates, L.P. v. Electronic Associates, Inc., COMAX,
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Inc., american Metal, Inc., David McAvoy III et al. (Docket No.
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MON-L-6492-92)
*On April 5, 1994, Stephen Pudles filed an action in Superior Court of
New Jersey, Law Division, County of Ocean alleging that: (i) Lender breached an
oral agreement with Mr. Pudles by refusing to pay certain agreed upon
compensation to him; (ii) Lender made negligent misrepresentations in inducing
Mr. Pudles to enter into such oral contract per the period following Mr. Pudles'
voluntary resignation from his employment with Lender; and (iii) Lender
defrauded Mr. Pudles.