Exhibit 10.4.2
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BUSINESS LOAN AGREEMENT
This Agreement dated as of February 7, 1996, is between
Bank of America National Trust and Savings Association (the
"Bank") and Separation and Recovery Systems, Inc. (the
"Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit to the Borrower. The amount
of the line of credit (the "Facility No. 1 Commitment") is
One Million Dollars ($1,000,000).
(b) This is a revolving line of credit with a within line
facility for letters of credit. During the availability
period, the borrower may repay principal amounts and
reborrow them.
(c) The Borrower agrees not to permit the outstanding principal
balance of the line of credit plus the outstanding amounts
of any letters of credit, including amounts drawn on letters
of credit and not yet reimbursed, to exceed the Facility
No. 1 Commitment.
1.2 AVAILABILITY PERIOD. The line of credit is available
between the date of this Agreement and December 31, 1996 (the
"Facility No. 1 Expiration Date") unless the Borrower is in
default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as
described below, the interest rate is the Bank's Reference
Rate plus three-eights (0.375) of one percentage point.
(b) The Reference Rate is the rate of interest publicly
announced from time to time by the bank in San Francisco,
California, as its Reference Rate. The Reference Rate is
set by the Bank based on various factors, including the
Bank's costs and desired return, general economic conditions
and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its
customers at, above, or below the Reference Rate. Any
change in the Reference Rate shall take effect at the
opening of business on the day specified in the public
announcement of a change in the Bank's Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on March 1, 1996, and then
monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay in full all principal and any unpaid
interest or other charges outstanding under this line of
credit no later than the Facility No. 1 Expiration Date.
Any amount bearing interest at an optional interest rate (as
described below) may be repaid at the end of the applicable
interest period, which shall be no later than the Facility
No. 1 Expiration Date.
1.5 OPTIONAL INTEREST RATES. Instead of the interest rate based
on the Bank's Reference Rate, the Borrower may elect to have all
or portions of the line of credit (during the availability
period) bear interest at the rate(s) described below during an
interest period agreed to by the Bank and the Borrower. Each
interest rate is a rate per year. Interest will be paid on the
last day of each interest period, and, if the interest period is
long than 30 days, then on the first day each month during the
interest period. At the end of any interest period, the interest
rate will revert to the rate based on the Reference Rate, unless
the Borrower has designated another optional interest rate for
the portion.
1.6 FIXED RATE. The Borrower may elect to have all or portions
of the principal balance of the line of credit bear interest at
the Fixed Rate, subject to the following requirements:
(a) The "Fixed Rate" means the fixed rate the Bank and the
Borrower agree will apply to the portion during the
applicable interest period.
(b) The interest period during which the Fixed Rate will be in
effect will be no shorter than 14 days and no longer than
one year.
(c) Each Fixed Rate portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).
(d) The Borrower may not elect a Fixed Rate with respect to any
portion f the principal balance of the line of credit which
is scheduled to be repaid before the last day of the
applicable interest period.
(e) Any portion of the principal balance of the line of credit
already bearing interest at the Fixed Rate will not be
converted to a different rate during its interest period.
(f) Each prepayment of a Fixed Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid, and
a prepayment fee equal to the amount (if any) by which:
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the
last day of the interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the
certificate of deposit market for a period staring on
the date on which it was prepaid and ending on the
last day of the interest period for such portion.
1.7 LETTERS OF CREDIT. This line of credit may be used for
financing:
(i) commercial letters of credit with a maximum maturing
of 365 days but not to extend more than 90 days beyond
the Facility No. 1 Expiration Date. Each commercial
letter of credit will require drafts payable at sight.
(ii) standby letters of credit with a maximum maturing of
365 days but not to extend more than 90 days beyond
the Facility No. 1 Expiration Date.
(iii) The amount of letters of credit outstanding at any one
time, (including amounts drawn on letters of credit
and not yet reimbursed), may not exceed Five Hundred
Thousand Dollars ($500,000).
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of
the Bank, be added to the principal amount outstanding under
this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters
of credit.
(c) the issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's written approval
and must be in form and content satisfactory to the Bank and
in favor of a beneficiary acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for
Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit.
(e) to allow the Bank to automatically charge its checking
account for applicable fees, discounts, and other charges.
2. FACILITY NO. 2: LINE OF CREDIT AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit to the Borrower. The amount
of the line of credit (the "Facility No. 2 Commitment") is
Three Million Dollars ($3,000,000).
(b) This is a non-revolving line of credit with a term repayment
option. Any amount borrowed, even if repaid before the end
of the availability period, permanently reduces the
remaining available line of credit.
(c) The Borrower agrees not to permit the outstanding principal
balance of the line of credit to exceed the Facility No. 2
Commitment.
2.2 AVAILABILITY PERIOD. The line of credit is available
between the date of this Agreement and December 31, 1996 (the
"Facility No. 2 Expiration Date") unless the Borrower is in
default.
2.3 OUTSTANDING TERM LOAN. There is outstanding from the Bank
to the Borrower a term loan in the original principal amount of
Six Hundred Fifty Thousand Dollars ($650,000). This term loan is
currently subject to the terms and conditions of Facility No. 2
of the Business Loan Agreement dated December 21, 1994. As of
the date of this Agreement, the term loan shall be deemed to be
outstanding as Facility No. 2 under this Agreement, and shall be
subject to all the terms and conditions stated in this Agreement.
2.4 INTEREST RATE. Unless the Borrower elects an optional
interest rate as described below, the interest rate is the Bank's
Reference Rate plus three-eighths (0.375) of one percentage
point.
2.5 REPAYMENT TERMS.
(a) The Borrower will pay interest on March 1, 1996, and then
monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay the principal amount outstanding on
the Facility No. 2 Expiration Date in 36 successive equal
monthly installments starting January 31, 1997. On
December 31, 1999, the Borrower will repay the remaining
principal balance plus any interest then due.
(c) The Borrower may prepay the loan in full or in part at any
time. The prepayment will be applied to the most remote
installment of principal due under this Agreement.
2.6 OPTIONAL INTEREST RATES. Instead of the interest rate based
ont he Bank's Reference Rate, the Borrower may elect to have all
or portions of the loan (during the term repayment period) bear
interest at the rate(s) described below during an interest period
agreed to by the Bank and the Borrower. Each interest rate is a
rate per year. Interest will be paid on the last day of each
interest period, and, if the interest period is long than 30
days, then on the first day each month during the interest
period. At the end of any interest period, the interest rate
will revert to the rate based ont he Reference Rate, unless the
Borrower has designated another optional interest rate for the
portion.
2.7 FIXED RATE. The Borrower may elect to have all or portions
of the principal balance of the loan bear interest at the Fixed
rate, subject to the following requirements:
(a) The "Fixed Rate" means the fixed interest rate the Bank and
the Borrower agree will apply to the portion during the
applicable interest period.
(b) The interest period during which the Fixed Rate will be in
effect will be no shorter than 14 days and no longer than
one year.
(c) Each Fixed Rate portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).
(d) The Borrower may not elect a Fixed Rate with respect to any
portion of the principal balance of the loan which is
scheduled to be repaid before the last day of the applicable
interest period.
(e) Any portion of the principal balance of the loan already
bearing interest at the Fixed Rate will not be converted to
a different rate during its interest period.
(f) Each prepayment of a Fixed Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid, and
a prepayment fee equal to the amount (if any) by which:
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the
last day of the interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the
certificate of deposit market for a period starting on
the date on which it was prepaid and ending on the
last day of the interest period for such portion.
3. FACILITY NO. 3: LINE OF CREDIT AMOUNT AND TERMS
3.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, the Bank
will provide a line of credit to the Borrower. The amount
of the line of credit (the "Facility No. 3 Commitment") is
One Million Four Hundred Thousand Dollars ($1,400,000).
(b) This is a non-revolving line of credit with a term repayment
option. Any amount borrowed, even if repaid before the end
of the availability period, permanently reduces the
remaining available line of credit.
(c) The Borrower agrees not to permit the outstanding principal
balance of the line of credit to exceed the Facility No. 3
Commitment.
3.2 AVAILABILITY PERIOD. The line of credit is available
between the date of this Agreement and June 30, 1996 (the
"Facility No. 3 Expiration Date") unless the Borrower is in
default.
3.3 INTEREST RATE. Unless the Borrower elects an optional
interest rate as described below, the interest rate is the Bank's
Reference Rate plus three-eighths (0.375) of one percentage
point.
3.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on March 1, 1996, and then
monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay the principal amount outstanding on
the Facility No. 3 Expiration Date in 14 successive equal
monthly installments starting July 31, 1996. On August 30,
1997, the Borrower will repay the remaining principal
balance plus any interest then due.
(c) The Borrower may prepay the loan in full or in part at any
time. The prepayment will be applied to the most remote
installment of principal due under this Agreement.
3.5 OPTIONAL INTEREST RATES. Instead of the interest rate based
on the Bank's Reference Rate, the Borrower may elect to have all
or portions of the loan (during the term repayment period) bear
interest at the rate(s) described below during an interest period
agreed to by the Bank and the Borrower. Each interest rate is a
rate per year. Interest will be paid on the last day of each
interest period, and, if the interest period is longer than 30
days, then on the first day each month during the interest
period. At the end of any interest period, the interest rate
will revert to the rate based on the Reference Rate, unless the
Borrower has designated another optional interest rate for the
portion.
3.6 FIXED RATE. The Borrower may elect to have all or portions
of the principal balance of the loan bear interest at the Fixed
Rate, subject to the following requirements:
(a) The "Fixed Rate" means the fixed interest rate the Bank and
the Borrower agree will apply to the portion during the
applicable interest period.
(b) The interest period during which the Fixed Rate will be in
effect will be no shorter than 14 days and no longer than
one year.
(c) Each Fixed Rate portion will be for an amount not less than
Five Hundred Thousand Dollars ($500,000).
(d) The Borrower may not elect a Fixed Rate with respect to any
portion of the principal balance of the loan which is
scheduled to be repaid before the last day of the applicable
interest period.
(e) Any portion of the principal balance of the loan already
bearing interest at the Fixed Rate will not be converted to
a different rate during its interest period.
(f) Each prepayment of a Fixed Rate portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid, and
a prepayment fee equal to the amount (if any) by which:
(i) the additional interest which would have been payable
on the amount prepaid had it not been paid until the
last day of the interest period, exceeds
(ii) the interest which would have been recoverable by the
Bank by placing the amount prepaid on deposit in the
certificate of deposit market for a period starting on
the date on which it was prepaid and ending on the
last day of the interest period for such portion.
4. FEES AND EXPENSES
4.1 UNUSED COMMITMENT FEE (FACILITY NO. 1). The Borrower agrees
to pay a fee on any difference between the Facility No. 1
Commitment and the amount of credit it actually uses, determined
by the weighted average loan balance maintained during the
specified period. The fee will be calculated at .50% per year.
this fee is due on March 31, 1996, and on the last day of each
following quarter until the Facility No. 1 Expiration Date.
4.2 EXPENSES.
(a) The Borrower agrees to immediately repay the Bank for
expenses that include, but are not limited to, filing,
recording and search fees, appraisal fees, title report fees
and documentation fees.
(b) The Borrower agrees to reimburse the Bank for any expenses
it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement.
Expenses include, but are not limited to, reasonable
attorneys' fees, including any allocated costs of the Bank's
in-house counsel.
(c) The Borrower agrees to reimburse the Bank for the cost of
periodic audits and appraisals of the personal property
collateral securing this Agreement, at such intervals as the
Bank may reasonably require. The audits and appraisals may
be performed by employees of the Bank or by independent
appraisers.
5. COLLATERAL
5.1 PERSONAL PROPERTY. The Borrower's obligations to the Bank
under this Agreement will be secured by personal property the
Borrower now owns or will own in the future s listed below. The
collateral is further defined in security agreement(s) executed
by the Borrower. In addition, all personal property collateral
securing this Agreement shall also secure all other present and
future obligations of the Borrower to the Bank (excluding any
consumer credit covered by the federal Truth in Lending law,
unless the Borrower has otherwise agreed in writing). All
personal property collateral securing any other present or future
obligations of the borrower to the Bank shall also secure this
Agreement.
(a) Receivables and general intangibles.
(b) Inventory.
(c) Machinery and equipment.
6. DISBURSEMENTS, PAYMENTS AND COSTS
6.1 REQUESTS FOR CREDIT. Each request for an extension of
credit will be made in writing in a manner acceptable to the
Bank, or by another means acceptable to the Bank.
6.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank
and each payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by
the Bank from time to time;
(b) made for the account of the Bank's branch selected by the
Bank from time to time;
(c) made in immediately available funds, or such other type of
funds selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the
Bank may, at its discretion, require the Borrower to sign
one or more promissory notes.
6.3 TELEPHONE AUTHORIZATION.
(a) The Bank may honor telephone instructions for advances or
repayments or for the designation of option interest rates
given by any one of the individuals authorized to sign loan
agreements on behalf of the Borrower, or any other
individual designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will be
withdrawn from the Borrower's account number 14569-50093, or
such other of the Borrower's accounts with the Bank as
designated in writing by the Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its
officers, employees, and agents) from all liability, loss,
and costs in connection with any act resulting rom telephone
instructions it reasonably believes are made by any
individual authorized by the Borrower to give such
instructions. This indemnity and excuse will survive this
Agreement.
6.4 DIRECT DEBIT.
(a) The Borrower agrees that interest principal payments and any
fees will be deducted automatically on the due date from
checking account number 14569-500093.
(b) The Bank will debit the account on the dates the payments
become due. If a due date does not fall on a banking day,
the Bank will debit the account on the first banking day
following the due date.
(c) The Borrower will maintain sufficient funds in the account
on the dates the Bank enters debits authorized by this
Agreement. If there are insufficient funds in the account
on the date the Bank enters any debit authorized by this
Agreement, the debit will be reversed.
6.5 BANKING DAYS. Unless otherwise provided in this Agreement a
banking day is a day other than a Saturday or a Sunday on which
the Bank is open for business in California. All payments and
disbursements which would be due on a day which is not a banking
day will be due on the next banking day. All payments received
on a day which is not a banking day will be applied to the credit
on the next banking day.
6.6 TAXES. The Borrower will not deduct any taxes from any
payment sit makes to the Bank. If any government authority
imposes any taxes on any payments made by the Borrower, the
Borrower will pay the taxes and will also pay to the Bank, at the
time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield the Bank
would have received if such taxes had not been imposed. Upon
request by the Bank, the Borrower will confirm that it has paid
the taxes by giving the Bank official tax receipts (or notarized
copies) within 30 days after the due date. However, the Borrower
will not pay the Bank's net income taxes.
6.7 ADDITIONAL COSTS. The Borrower will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute
or regulation, or any request or requirement of a regulatory
agency which is applicable to all national banks or a class of
all national banks. The costs and losses will be allocated to
the loan in a manner determined b the Bank, using any reasonable
method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
6.8 INTEREST CALCULATION. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the
basis of a 360-day year and the actual number of days elapsed.
This results in more interest or a higher fee than if a 365-day
year is used.
6.9 INTEREST ON LATE PAYMENTS. At the Bank's sole option in
each instance, any amount not paid when due under this Agreement
(including interest) shall bear interest from the due date at the
Bank's Reference Rate plus one and one-half (1.50) percentage
points. this may result in compounding of interest.
7. CONDITIONS
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any
credit to the Borrower under this Agreement.
7.1 AUTHORIZATIONS. Evidence that the execution, delivery and
performance by the Borrower and any guarantor) of this Agreement
and any instrument or agreement required under this Agreement
have been duly authorized.
7.2 SECURITY AGREEMENTS. Signed original security agreements,
assignments, financing statements and fixture filings (together
with collateral in which the Bank requires a possessory security
interest), which the Bank requires.
7.3 EVIDENCE OF PRIORITY. Evidence that security interests and
liens in favor of the Bank are valid, enforceable, and prior to
all others' rights and interests, except those the Bank consents
to in writing.
7.4 INSURANCE. Evidence of insurance coverage, as required in
the "Covenants" section of this Agreement.
7.5 OTHER ITEMS. Any other items that the Bank reasonably
requires.
8. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is
repaid in full, the Borrower makes the following representations
and warranties. Each request for an extension of credit
constitutes a renewed representation.
8.1 ORGANIZATION OF BORROWER. The Borrower is a corporation
duly formed and existing under the laws of the state where
organized.
8.2 AUTHORIZATION. This Agreement, and any instrument or
agreement required hereunder, are within the Borrower's powers,
have been duly authorized, and do not conflict with any of its
organization papers.
8.3 ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and
binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will
be similarly legal, valid, binding and enforceable.
8.4 GOOD STANDING. In each state in which the Borrower does
business, it is properly
licensed, in good standing, and, where required, in compliance
with fictitious name statutes.
8.5 NO CONFLICTS. This Agreement does not conflict with any
law, agreement, or obligation by which the Borrower is bound.
8.6 FINANCIAL INFORMATION. All financial and other information
that has been or will be supplied to the Bank, including the
Borrower's financial statement dated as of June 30, 1995, is:
(a) sufficiently complete to vie the Bank accurate knowledge of
the Borrower's ( and any guarantor's) financial condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there
has been no material adverse change in the assets or the
financial condition of the Borrower (or any guarantor).
8.7 LAWSUITS. There is no lawsuit, tax claim or other dispute
pending or threatened against the Borrower, which, if lost, would
impair the borrower's financial condition or ability to repay the
loan, except as have been disclosed in writing to the Bank.
8.8 COLLATERAL. All collateral required in this Agreement is
owned by the grantor of the security interest free of any title
defects or any liens or interests of others.
8.9 PERMITS, FRANCHISES. The Borrower possesses all permits,
memberships, franchises, contracts and licenses required and all
trademark rights, trade name rights, patent rights and fictitious
name rights necessary to enable it to conduct the business in
which it is now engaged.
8.10 OTHER OBLIGATIONS. The Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or
any other material lease, commitment, contract, instrument or
obligation.
8.11 INCOME TAX RETURNS. The Borrower had no knowledge of any
pending assessments or adjustments of its income tax for any
year.
8.12 NO EVENT OF DEFAULT. There is no event which is, or with
notice or lapse of time or both would be, a default under this
Agreement.
8.13 ERISA PLANS.
(a) the Borrower has fulfilled its obligations, if any, under
the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA
and the Code, and has not incurred any liability with
respect to any Plan under title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any
Plan has been taken and no notice of intent to terminate a
Plan has been filed under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan
under Section 4042 of ERISA, and no event has occurred or
condition exists which might constitute grounds for the
commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes
of this Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(ii) "ERISA" means the Employee Retirement Income Act of
1974, as amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of
ERISA.
(iv) "Plan" means any employee pension benefit plan
maintained or contributed to by the Borrower and
insured by the Pension Benefit Guaranty Corporation
under Title IV of ERISA.
8.14 LOCATION OF BORROWER. The Borrower's place of business (or,
if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the
Borrower's signature on this Agreement.
9. COVENANTS
The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
9.1 USE OF PROCEEDS. To use the proceeds of Facility No. 1 only
for working capital and issuance of letters of credit; and to use
the proceeds of Facility No. 2 and facility No. 3 only for
capital expenditures.
9.2 FINANCIAL INFORMATION. To provide the following financial
information and statements and such additional information as
requested by the Bank from time to time:
(a) Within 120 days of the Borrower's fiscal year end, the
Borrower's annual financial statements. These financial
statements must be audited (with an unqualified opinion) by
a Certified Public Accountant ("CPA") acceptable to the
Bank. The statements shall be prepared on a consolidated
basis.
(b) Within 45 days of the period's end, the Borrower's quarterly
financial statements. these financial statements may be
Borrower prepared. The statements shall be prepared on a
solidated basis.
(c) Within the periods provided in (a) and (b) above, a
compliance certificate of the Borrower signed by an
authorized financial officer of the Borrower setting forth
(i) the information and computations (in sufficient detail)
to establish that the Borrower is in compliance with all
financial covenants at the end of the period covered by the
financial statements then being furnished and (ii) whether
there existed as of the date of such financial statements
and whether there exists as of the date of the certificate,
any default under this Agreement and, if any such default
exists, specifying the nature thereof and the action the
Borrower is taking and proposes to take with respect
thereto.
(d) Within 45 days of the period's end, the Borrower's quarterly
equipment list. This equipment list must include model
number and location, and such other information as the Bank
may require.
9.3 QUICK RATIO. To maintain on a consolidated basis a ratio of
quick assets to current liabilities of at least 65:1, on a
quarterly basis. "Quick assets" means cash, short-term cash
investments, net trade receivables and marketable securities not
classified as long-term investments.
9.4 TANGIBLE NET WORTH. To maintain on a consolidated basis
tangible net worth, on a quarterly basis, equal to at least the
sum of the following:
(a) Seven Million Four Hundred Thousand Dollars ($7,400,000),
plus
(b) 75% of net income after income taxes earned in each annual
accounting period commencing fiscal year ending June 30,
1996.
"Tangible net worth" means the gross book value of the Borrower's
assets (excluding goodwill, patents, trademarks, trade names,
,organization expense, treasury stock, unamortized debt discount
and expense, deferred research and development costs, deferred
marketing expenses, and other like intangibles) less total
liabilities, including but not limited to accrued and deferred
income taxes, and any reserves against assets.
9.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. to maintain
on a consolidated basis a ratio of total liabilities to tangible
net worth not exceeding .75:1, on a quarterly basis. "Total
liabilities" means the sum of current liabilities plus long term
liabilities.
9.6 FIXED CHARGE COVERAGE RATIO. To maintain on a consolidated
basis a Fixed Charge Coverage Ratio of at least 1:40:1. "Fixed
charge Coverage Ratio" is defined as the (sum of net profit after
taxes plus depreciation and interest expense minus non-financed
capital expenditures) divided by (the sum of current maturities
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of long term debt plus capital leases and interest expense).
This ratio will be calculated at the end of each fiscal quarter,
using the results of that quarter and each of the 3 immediately
preceding quarters. Current maturities of long term debt is
defined as required principal payments for the four-quarter
period measured. Non-financed capital expenditures is defined as
actual capital expenditures less positive increases in current
maturities of long term debt and long term debt outstanding for
the four-quarter period measured.
9.7 LIMITATION ON LOSSES. Not to incur on a consolidated basis
a net loss before taxes and extraordinary items in any two
consecutive quarterly accounting periods.
9.8 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent debts or lease obligations (other than those to the
Bank), or become liable for the debts of others without the
Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade
credit.
(b) Endorsing negotiable instruments received in the usual
course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and leases in existence on the date of this Agreement
disclosed in writing to the Bank in the Borrower's financial
statement dated June 30, 1995.
9.9 OTHER LIENS. Not to create, assume, or allow any security
interest or lien (including judicial liens) on property the
Borrower now or later owns, except:
(a) Debts of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
9.10 DIVIDENDS. Not to declare or pay any dividends on any of
its shares except dividends payable in capital stock of the
Borrower, and not to purchase, redeem or otherwise acquire for
value any of its shares, or create any sinking fund in relation
thereto.
9.11 OUT OF DEBT PERIOD (FACILITY NO. 1). To repay any advances
in full, and not to draw any additional advances on its Facility
No. 1 line of credit, for a period of at least 30 consecutive
days in each line-year. "Line-year" means the period between the
date of this Agreement and December 31, 1996, and each subsequent
one-year period (if any). For the purposes of this paragraph,
"advances" does not include undrawn amounts of outstanding
letters of credit.
9.12 NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over Two Hundred Fifty Thousand Dollars
(S250.000) against the Borrower (or any guarantor).
(b) any substantial dispute between the Borrower (or any
guarantor) and any government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's (or any
guarantor's) financial condition or operations.
(e) any change in the Borrower's name, legal structure, place of
business, or chief execute office if the Borrower has more
than one place of business.
9.13 BOOKS AND RECORDS. To maintain adequate books and records.
9.14 AUDITS. To allow the Bank and its agents to inspect the
Borrower's properties and examine, audit and make copies of books
and records at any reasonable time. If any of the Borrower's
properties, books or records are in the possession of a third
party, the Borrower authorizes that third party to permit the
Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information
concerning such properties, books and records.
9.15 COMPLIANCE WITH LAWS. To comply with the laws including any
fictitious name statute), regulations, and orders of any
government body with authority over the Borrower's business.
9.16 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
9.17 MAINTENANCE OF PROPERTIES. To make any repairs, renewals,
or replacements to keep the Borrower's properties in good working
condition.
9.18 PERFECTION OF LIENS. To help the Bank perfect and protect
its security interests and liens, and reimburse it for related
costs it incurs to protect its security interests and liens.
9.19 COOPERATION. To take any action requested by the Bank to
carry out the intent of this Agreement.
9.20 INSURANCE.
(a) Insurance Covering Collateral. To maintain all risk property
damage insurance policies covering the tangible property
comprising the collateral. Each insurance policy must be in
an amount acceptable to the Bank. The insurance must be
issued by an insurance company acceptable to the Bank and
must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance as is
usual for the business it is in.
(c) Evidence of Issuance. Upon the request of the Bank, to
deliver to the Bank a copy of each insurance policy, or, if
permitted by the Bank, a certificate of insurance listing an
insurance in force.
9.21 ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's
written consent
(a) engage in any business activities substantially different
from the Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination.
(d) lease, or dispose of all or a substantial part of the
Borrower's business or the Borrower's assets.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair
market value, or enter into any sale and leaseback agreement
covering any of its fixed or capital assets. (g) voluntarily
suspend its business for more than 5 consecutive days in any
30 day period.
9.22 ERISA PLANS. To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b)
of ERISA for which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a
Plan or the filing of any notice of intent to terminate
under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to a Plan
under Section 4041 (b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.
10. HAZARDOUS WASTE INDEMNIFICATION
The Borrower, will indemnify and hold harmless the Bank from any
loss or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous
substance. This indemnity will apply whether the hazardous
substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity
includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and
staff). The indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees,
agents, successors, attorneys and assigns. For these purposes,
the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any federal,
state or local law. This indemnity will survive repayment of the
Borrower's obligations to the Bank.
11. DEFAULT
If any of the following events occur, the Bank may do one or more
of the following: declare the Borrower in default, stop making
any additional credit available to the Borrower, and require the
Borrower to repay its entire debt immediately and without prior
notice. If an event of default occurs under the paragraph
entitled "Bankruptcy," below, with respect to the Borrower, then
the entire debt outstanding under this Agreement will
automatically be due immediately.
11.1 FAILURE TO PAY. The Borrower fails to make a payment under
this Agreement when due.
11.2 LIEN PRIORITY. The Bank fails to have an enforceable first
lien (except for any prior liens to which the Bank has consented
in writing) on or security interest in any property given as
security for this loan.
11.3 FALSE INFORMATION. The Borrower has given the Bank false or
misleading information or representations.
11.4 BANKRUPTCY. The Borrower (or any guarantor) files a
bankruptcy petition, a bankruptcy petition is filed against the
Borrower (or any guarantor), or the Borrower (or any guarantor)
makes a general assignment for the benefit of creditors.
11.5 RECEIVERS. A receiver or similar official is appointed for
the Borrower's (or any guarantor's) business, or the business is
terminated.
11.6 LAWSUITS. Any lawsuit or lawsuits are filed on behalf of
one or more trade creditors against the Borrower in an aggregate
amount of Two Hundred Fifty Thousand Dollars (S250,000) or more
in excess of any insurance coverage.
11.7 JUDGMENTS. Any judgments or arbitration awards are entered
against the Borrower (or any guarantor), or the Borrower (or any
guarantor) enters into any settlement agreements with respect to
any litigation or arbitration, in an aggregate amount of Two
Hundred Fifty Thousand Dollars (S250,000) or more in excess of
any insurance coverage.
11.8 GOVERNMENT ACTION. Any government authority takes action
that the Bank believes materially adversely affects the
Borrower's (or any guarantor's) financial condition or ability to
repay.
11.9 MATERIAL ADVERSE CHANGE. A material adverse change occurs
in the Borrower's (or any guarantor's) financial condition,
properties or prospects, or ability to repay the loan.
11.10 CROSS-DEFAULT. Any default occurs under any agreement
in connection with any credit the Borrower (or any guarantor) has
obtained from anyone else or which the Borrower (or any
guarantor) has guaranteed.
11.11 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty,
subordination agreement, security agreement or other document
required by this Agreement is violated or no longer in effect.
11.12 OTHER BANK AGREEMENTS. The Borrower (or any
guarantor) fails to meet the conditions of, or fails to perform
any obligation under any other agreement the Borrower (or any
guarantor) has with the Bank or any affiliate of the Bank.
11.13 ERISA PLANS. The occurrence of any one or more of the
following events with respect to the Borrower, provided such
event or events could reasonably be expected, in the judgment of
the Bank, to subject the Borrower to any tax, penalty or
liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial
condition of the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which
is, in the reasonable judgment of the Bank likely to result
in the termination of such Plan for purposes of Title IV of
ERISA.
(b) Any Plan termination (or commencement of proceedings to
terminate a Plan) or the Borrower's full or partial
withdrawal from a Plan.
11.14 OTHER BREACH UNDER AGREEMENT. The Borrower fails to
meet the conditions of, or fails to perform any obligation under,
any term of this Agreement not specifically referred to in this
Article.
12. ENFORCING THIS AGREEMENT; MISCELLANEOUS
12.1 GAAP. Except as otherwise stated in this Agreement, all
financial information provided to the Bank and all financial
covenants will be made under generally accepted accounting
principles, consistently applied.
12.2 CALIFORNIA LAW. This Agreement is governed by California
law.
12.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the
Borrowers and the Bank's successors and assignees. The Borrower
agrees that it may not assign this Agreement without the Bank's
prior consent. The Bank may sell participations in or assign this
loan, and may exchange financial information about the Borrower
with actual or potential participants or assignees. If a
participation is sold or the loan is assigned, the purchaser will
have the right of set-off against the Borrower.
12.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies
or claims between the Borrower and the Bank, including but
not limited to those that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or
delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business
conducted between the Borrower and the Bank, including
claims for injury to persons, property or business
interests (torts).
(b) At the request of the Borrower or the Bank, any such
controversies or claims will be settled by arbitration in
accordance with the United States Arbitration Act. The
United States Arbitration Act-will apply even though this
Agreement provides that it is governed by California law.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its
commercial rules of arbitration.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this
paragraph is the equivalent of the filing of a lawsuit, and
any claim or controversy which may be arbitrated under this
paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to
decide whether any such claim or controversy is barred by
the statute of limitations and, if so, to dismiss the
arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable,
the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration proceeding may
be submitted to any authorized court of law to be confirmed
and enforced.
(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission
to arbitration, arises from or relates to an obligation to
the Bank secured by real property located in California. In
this case, both the Borrower and the Bank must consent to
submission of the claim or controversy to arbitration. If
both parties do not consent to arbitration, the controversy
or claim will be settled as follows:
(i) The Borrower and the Bank will designate a referee (or
a panel of referees) selected under the auspices of
the American Arbitration Association in the same
manner as arbitrators are selected in
Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will
be appointed by a court as provided in California Code
of Civil Procedure Section 638 and the following
related sections;
(iii) The referee (or the presiding referee of the panel)
will be an active attorney or a retired judge; and
(iv) The award that results from the decision of the
referee (or the panel) will be entered as a judgment
in the court that appointed the referee, in accordance
with the provisions of California Code of Civil
Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or
the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal
property collateral; or
(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a
court action, does not constitute a waiver of the right of
the Borrower or the Bank, including the suing party, to
submit the controversy or claim to arbitration if the other
party contests the lawsuit. However, if the controversy or
claim arises from or relates to an obligation to the Bank
which is secured by real property located in California at
the time of the proposed submission to arbitration, this
right is limited according to the provision above requiring
the consent of both the Borrower and the Bank to seek
resolution through arbitration.
(j) If the Bank forecloses against any real property securing
this Agreement, the Bank has the option to exercise the
power of sale under the deed of trust or mortgage, or to
proceed by judicial foreclosure.
12.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank
retains all rights, even if it makes a loan after default. If the
Bank waives a default, it may enforce a later default. Any
consent or waiver under this Agreement must be in writing.
12.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for
all reasonable costs incurred by the Bank in connection with
administering this Agreement.
12.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for
any reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or
remedies under this Agreement and any other documents executed in
connection with this Agreement, and including any amendment,
waiver, "workout or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees
incurred in connection with the lawsuit or arbitration
proceeding, as determined by the court or arbitrator. As used in
this paragraph, attorneys' fees" includes the allocated costs of
in-house counsel.
12.8 ONE AGREEMENT. This Agreement and any related security or
other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements
between the Bank and the Borrower concerning this credit;
and
(b) replace any prior oral or written agreements between the
Bank and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final,
complete and exclusive statement of the terms agreed to by
them.
In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will
prevail.
12.9 NOTICES. Notices required under this Agreement shall be
personally delivered or sent by first class mail, postage
prepaid, to the addresses on the signature page of this
Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.
12.10 HEADINGS. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning
of any provisions of this Agreement.
12.11 COUNTERPARTS. This Agreement may be executed in as
many counterparts as necessary or convenient, and by the
different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts
shall constitute but one and the same agreement.
12.12 PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes
the Business Loan Agreement entered into as of December 21, 1994,
between the Bank and the Borrower, and any credit outstanding
thereunder shall be deemed to be outstanding under this
Agreement.
This Agreement is executed as of the date stated at the top of
the first page.
Bank of America
National Trust and Savings Separation &
Association Recovery Systems, Inc.
X /s/ L.A. Perfetto X /s/ Joseph De Franco
------------------------------- -----------------------------
By: L.A. Perfetto By: Joseph De Franco
Title: Vice President Title: President
Address where notices to the Address where notices to the
Bank are to be sent: Borrower are to be sent:
North Orange County RCBO #1456
300 South Harbor Boulevard 1762 McGaw Avenue
Anaheim, CA 92805 Irvine, CA 92714-4962