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EXHIBIT 10.17
[SANWA BANK CALIFORNIA LOGO]
1998 CREDIT AGREEMENT
This 1998 CREDIT AGREEMENT (the "Agreement") is made and entered into this
1st day of June, 1998, by and between SANWA BANK CALIFORNIA (the "Bank") and
ALIGN RITE CORPORATION (the "Borrower"), on the terms and conditions that
follow. The Borrower is currently indebted to the Bank pursuant to a Line of
Credit Agreement dated as of March 28, 1996 (together with all addenda and
amendments, the "1996 Agreement"). It is the intention of the parties that this
Agreement supersede in its entirety the 1996 Agreement.
1. DEFINITIONS
1.1 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):
"Advance" shall mean an advance to the Borrower under the Line of
Credit and includes a COF Advance, a LIBOR Advance and a Variable Rate
Advance, as the context requires.
"Business Day" shall mean a day, other than a Saturday or Sunday,
on which commercial banks are open for business in California.
"Close-Out Date" means the day (which shall be a Business Day) on
which the Bank, pursuant to Section 4.8(a) hereof, closes out and
liquidates FX Transactions.
"Closing Value" has the meaning given to it in Section 4.8(a)(1)
hereof.
"Closing Gain" means the amount determined in accordance with
Section 4.8(a)(2) or 4.8(a)(3) hereof, as applicable.
"Closing Loss" means the amount determined in accordance with
Section 4.8(a)(2) or 4.8(a)(3) hereof, as applicable.
"COF Advance" has the meaning given in Section 2.4(c).
"COF Interest Period" has the meaning given in Section 2.4(c).
"COF Rate" means a rate per annum quoted by the Bank with respect
to a COF Advance which is approximately equal to the Bank's cost (as
determined by the Bank in its sole and absolute discretion) of acquiring
funds in an amount approximately equal to the relevant COF Advance and
for a period of time approximately equal to relevant COF Interest Period
for such COF Advance plus one and one quarter percent (1.25%), adjusted
any and all assessments, surcharges and reserve requirements pertaining
to the borrowing or purchase of such funds.
"Credit Limit" means FIFTEEN MILLION DOLLARS ($15,000,000.00).
"Debt" shall mean all liabilities of the Borrower less Subordinated
Debt.
"Debt Coverage Ratio" shall mean (a) the sum of net income after
tax and exclusive of extraordinary gains, plus depreciation and
amortization expense plus interest expense minus dividends for the twelve
month period then ending divided by (b) the sum of (1) 25% of the then
outstanding (A) principal amount of Advances
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plus (B) Letter of Credit Obligations and (C) FX Risk Liability plus (2) the
current portion long term debt plus (3) interest expense for the twelve month
period then ending.
"Default Interest Rate" has the meaning given in Section 10.2.
"Drawing" shall mean the presentation of a draft(s) together with any
accompanying documents by a beneficiary under a Letter of Credit to seeking
payment under such Letter of Credit.
"Effective Tangible Net Worth" means the Borrower's stated net worth
plus Subordinated Debt but less all intangible assets of the Borrower (i.e.,
goodwill, trademarks, patents, copyrights, organization expense and similar
intangible items including, but not limited to, investments in and all amounts
due form affiliates, officers or employees).
"Environmental Claims" means all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil
or criminal penalties, injunctive relief, or other type of relief, resulting
from or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden
or non-sudden, accidental or non-accidental placement, spills, leaks,
discharges, emissions or releases) of any Hazardous Material at, in, or from
property, whether or not owned by the Borrower, or (b) any other circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972,
the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law, the California
Solid Waste Management, Resource, Recovery and Recycling Act, the California
Water Code and the California Health and Safety Code.
"Environmental Permits" has the meaning provided in Section 7.11 hereof.
"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.
"Event of Default" means any of the events described in Section 9.1
which have not been waived by the Bank in writing.
"Expiration Date" means June 30, 1999 or the date of termination of the
Bank's commitment to lend under this Agreement pursuant to Section 9, whichever
shall occur first.
"Foreign Currency" means a legally traded currency (other than U.S.
Dollars) which may be transferred by paperless wire transfer and which the Bank
regularly trades.
"FX Risk Liability" means twenty percent (20%) (or such greater or
lesser percentage as the Bank may designate for any given FX Transaction due to
the Foreign Currency involved or the length of the FX Transaction) of the
aggregate of the Notional Values of all FX Transaction outstanding, net of any
Offsetting Transactions.
"FX Limit" means $375,000.00.
"FX Transaction" means any transaction between the Bank and the
Borrower pursuant to which the Bank has agreed to sell to or to purchase from
the Borrower a Foreign Currency of an agreed amount at an agreed price in U.S.
Dollars, deliverable and payable on an agreed date.
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"Guarantor" and "Guaranty" has the meaning given in Section 5.2.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"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.
"Interest Period" means a COF Interest Period or a LIBOR Interest
Period, or both, as the context requires.
"Letter of Credit" shall mean a letter of credit issued by Bank
pursuant to Section 3.
"Letter of Credit Obligations" shall mean, at any time, the aggregate
obligations of the Borrower then outstanding, or which may thereafter arise in
respect of Letters of Credit then issued by Bank, to reimburse the amount paid
by the Bank with respect to a past, present or future Drawing under Letters of
Credit.
"LIBOR" means the rate determined by the Bank's Treasury Desk as being
the arithmetic mean (rounded upwards, if necessary, to the nearest whole
multiple of one-sixteenth of one percent (1/16%)) of the U.S. dollar London
Interbank Offered Rates for such period appearing on page 3750 (or such other
page as may replace page 3750 of the Telerate screen at or about 11:00 a.m.
(London time) on the second Business Day prior to the first days of such period
(adjusted for any and all assessments, surcharges and reserve requirements).
"LIBOR Advance" has the meaning given in Section 2.4(b).
"LIBOR Interest Period" has the meaning given in Section 2.4(b).
"LIBOR Rate" means an interest rate per annum equal to LIBOR as quoted
by the Bank plus one and one quarter percent (1.25%).
"Line Account" shall have the meaning provided in Section 2.11 hereof.
"Line of Credit" shall mean the credit facility described in Section
2.
"Notional Value" means, with respect to any FX Transaction, the U.S.
Dollar value of such transaction (the U.S. Dollar equivalent of the price at
which the Bank agreed to sell to the Borrower a Foreign Currency or the price at
which the Bank agreed to purchase of a Foreign Currency from the Borrower).
"Obligations" shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement including, but not limited to, the unpaid principal
amount of Advances, the Letter of Credit Obligations, and FX Risk Liability.
"Offsetting Transaction" means an FX Transaction to purchase a Foreign
Currency and an FX Transaction to sell a Foreign Currency which are for the same
Foreign Currency and which have the same Settlement Date and designated as an
Offsetting Transaction at the time of the Transaction.
"Ordinary Course of Business" shall mean, with respect to any
transaction involving the Borrower or any of its subsidiaries or affiliates, the
ordinary course of the Borrower's business, as conducted by the Borrower in
accordance with past practice and undertaken by the borrower in good faith and
not for the purpose of evading
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any covenant or restriction in this Agreement or in any other document,
instrument or agreement executed in connection herewith.
"Permitted Liens": shall mean: (a) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (b) liens for taxes,
assessments or similar charges not yet due; (c) 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; (d) 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; and (e) liens and security
interests which, as of the date hereof, have been disclosed to and approved by
the Bank in writing.
"Reference Rate" means 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.
"Settlement Date" means, with respect to any FX Transaction, the
Business Day on which the Borrower has agreed to (i) deliver the required amount
of Foreign Currency or (ii) to pay in U.S. Dollars, the agreed purchase price of
the Foreign Currency.
"Sight Credit" means a Letter of Credit, the terms of which require
the Bank to make payment upon presentation of conforming documents.
"Standby Credit" means a Letter of Credit designed to be payable in
the event of default or other nonperformance by party obligated to the
beneficiary, such event to be evidenced by the presentation of documents.
"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.
"Usance Credit" means a Letter of Credit, the terms of which require
the Bank to make payment at a specified date or time not more than 90 days after
presentation of conforming documents.
"Variable Rate Advance" means as defined in Section 2.4(a).
"Variable Rate" means an interest rate per annum equal to the
Reference Rate.
1.2 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.
1.3 OTHER TERMS: Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.
2. THE LINE OF CREDIT
2.1 THE LINE OF CREDIT: The Bank agrees to make Advances to the Borrower
from time to time from the date hereof to the Expiration Date, provided the
aggregate amount of such Advances outstanding at any time does not exceed
$15,000,000 subject, however, to the further limitations provided in Section
5.1. Within the foregoing limits, the Borrower may borrow, partially or wholly
prepay, and re-borrow under this Section 2.
2.2 MAKING LINE ADVANCES: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (a) when
credited to any deposit account of the Borrower maintained with the Bank or (b)
when paid in accordance with the Borrower's written instructions. Subject to
the conditions precedent of Section 6 and provided such request is made in a
timely manner a provided in Section 2.6 below, Advances shall be made by the
Bank under the Line of Credit.
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2.3 REPAYMENT: On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount of all
Advances then outstanding, together with all accrued and unpaid interest
thereon.
2.4 INTEREST. Interest shall accrue from the date of each Advance under
the Line of Credit at one of the following rates, as quoted by the Bank and as
elected by the Borrower:
(a) Variable Rate Advances: At the Variable Rate, interest shall be
adjusted concurrently with any change in the Reference Rate. An Advance
based upon the Variable Rate is hereinafter referred to as a "Variable Rate
Advance".
(b) LIBOR Advances: At the LIBOR Rate as quoted by the Bank for
Advances in the minimum amount of $100,000.00 and in $100,000.00 increments
thereafter and for periods of 1, 2, 3 6, or 12 months or for such other
period of time that the Bank may quote and offer (the "LIBOR Interest
Period"), provided that (1) no LIBOR Interest Period shall extend beyond
the Expiration Date, (2) any LIBOR Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period, and (3) any LIBOR Interest Period which
expires on a day which is other than a Business Day shall expire on the
next succeeding Business day unless the next succeeding Business Day is in
the next calendar month in which case the LIBOR Interest Period shall
expire on the immediate preceding Business Day. An Advance based upon the
LIBOR Rate is hereinafter referred to as a "LIBOR Advance".
(c) COF Advances: At the COF Rate quoted by the Bank for Advances in
the minimum amount of $100,000,000 and in $100,000 increments thereafter
and for a period of time that the Bank may quote not less than ____ days
(the "COF Interest Period") and provided that (1) any such period of time
does not extend beyond the Expiration Date (2) any COF Interest Period
which would end on a day which is not a Business Day shall end on the next
succeeding Business Day. Advances based upon the COF Rate are hereinafter
referred to as "COF Advances".
2.5 NOTICE OF BORROWING. Upon telephonic notice which shall be received by
the Bank at or before 2:00 p.m. (California time) on a Business Day, the
Borrower may borrow under the Line of Credit by requesting:
(a) A Variable Rate Advance or COF Advance: A Variable Rate Advance or
COF Advance may be made on the day notice is received by the Bank;
provided, however, that if the Bank shall not have received notice at or
before 2:00 a.m. on the day such Advance is requested to be made, such
Variable Rate Advance or COF Advance may, at the Bank's option, be made on
the next Business Day.
(b) A LIBOR Advance: Notice of any LIBOR Advance 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 such LIBOR Advance to be made.
2.6 NOTICE OF ELECTION TO ADJUST INTEREST RATE: Upon telephonic notice
which shall be received by the Bank at or before 2:00 p.m. (California time) on
a Business Day, the Borrower may elect:
(a) Variable to COF: That interest on a Variable Rate Advance shall be
adjusted to accrue at the COF Rate; provided, however, that such notice
shall be received by the Bank no later than 2:00 p.m. on the Business Day
on which the Borrower requests that interest be adjusted to accrue at the
COF Rate.
(b) Variable to LIBOR: That interest on a Variable Rate Advance shall
be adjusted to accrue at the LIBOR Rate; provided, however, that such
notice shall be received by the Bank no later than two Business Days prior
to the Business Day on which the Borrower requests that interest be
adjusted to accrue at the LIBOR Rate.
(c) COF to Variable or COF: That interest on a COF Advance shall
continue to accrue at a newly quoted COF 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 2:00 p.m. on the last
day of the Interest Period pertaining to such COF Advance.
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(d) COF TO LIBOR: That interest on a COF Advance shall accrue at a
newly quoted LIBOR Rate provided that such notice shall be received by the Bank
no later than two Business Days prior to the last day of the last day of the
expiring COF Interest Period.
(e) LIBOR TO LIBOR: That interest on a LIBOR Advance shall accrue at
a newly quoted LIBOR Rate provided that such notice shall be received by the
Bank no later than two Business Days prior to the last day of the relevant LIBOR
Interest Period.
(f) LIBOR TO VARIABLE OR COF: That interest on a LIBOR Advance shall
accrue at a newly quoted COF 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 the last day of the relevant LIBOR Interest Period.
(g) FAILURE TO GIVE NOTICE: If the Bank shall not have received notice
as prescribed herein of the Borrower's election that interest on a COF Advance
shall accrue interest at a newly quoted LIBOR Rate or at a newly quoted COF Rate
or that interest on a LIBOR Advance shall accrue at the newly quoted COF Rate or
a newly quoted LIBOR Rate, as the case may be, 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 relevant COF Interest Period or LIBOR Interest
Period pertaining to such Advance.
2.7 PAYMENT OF INTEREST. The Borrower promises and agrees to pay interest
on the outstanding principal balance of Advances in arrears on the last day of
each calendar month commencing with the first such day to occur after the date
of this Agreement. If interest is not paid when due, it may, without waiving any
default occasioned by such nonpayment, be added to principal and thereafter bear
like interest.
2.8 PREPAYMENT. The Borrower may prepay any Variable Rate Advance in
whole or in part, at any time and without penalty, provided, however, that any
partial prepayment shall first be applied at the Bank's option, to accrued and
unpaid interest and next to the outstanding principal balance. The Borrower may
not voluntarily prepay a COF Advance or a LIBOR Advance other that on the last
day of the LIBOR Interest Period or COF Interest Period pertaining to such
Advance. If the whole or any part of any LIBOR Advance or COF Advance is prepaid
by reason of acceleration or pursuant to 2.10 below or as otherwise required by
this Agreement, the Borrower shall, upon the Bank's request, promptly pay to and
indemnify the Bank for all costs, expenses and any loss (including loss of
future interest income) actually incurred by the Bank and any loss (including
loss of profit resulting from the re-employment of funds) deemed sustained by
the Bank as a consequence of such prepayment. The Bank shall be entitled to fund
all or any portion of its Advances in any manner it may determine in its sole
discretion, but all calculations and transactions hereunder shall be conducted
as though the Bank actually funded all Advances through the purchase of dollar
deposits bearing interest at the same rate as U.S. Treasury securities in the
amount of the relevant Advance and in maturities corresponding to (a) the then
applicable Interest Period (b) the date of such purchase to the Expiration Date
hereunder.
2.9 INDEMNIFICATION FOR LIBOR RATE OR COF COSTS. During any period of
time in which interest on any Advance is accruing on the basis of the LIBOR
Rate or COF Rate, the Borrower shall, upon the Bank's request, promptly pay to
and reimburse the Bank for all costs incurred and payments made by the Bank by
reason of any future assessment, reserve, deposit or similar requirement or any
surcharge, tax or fee imposed upon the Bank as a result of the Bank's compliance
with any directive or requirement of any regulatory authority pertaining or
relating to funds used by the Bank in quoting and determining the LIBOR Rate or
COF Rate.
2.10. CONVERSION FROM LIBOR RATE OR COF 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 LIBOR Rate or COF Rate (a) has become infeasible because the Bank
is unable to determine the LIBOR Rate or COF Rate due to the unavailability of
U.S. Dollar deposits, contracts or certificates of deposit in an amount
approximately equal to the amount of the relevant Advance and for a period of
time approximately equal to the relevant LIBOR Interest Period or Interest
Period as the case may be or (b) is or has become unlawful 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 promptly give telephonic notice thereof (confirmed in writing) to
the Borrower, in which event any Advance bearing interest at the LIBOR Rate or
COF Rate as the case may be shall be deemed to be a Variable Rate Advance and
interest shall thereupon immediately accrue at the Variable Rate and shall
continue at such rate until the Bank determines that the LIBOR Rate or COF Rate
is no longer infeasible or unlawful.
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2.11 LINE ACCOUNT. The Bank shall maintain on its books a record of
account in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the Line of
Credit (the "Line Account"). The Bank shall provide the Borrower with a monthly
statement of the Borrower's Line Account upon the Borrower's request therefor
from time to time, which statement shall be considered to be correct and
conclusively binding on the Borrower unless the Borrower notifies the Bank to
the contrary within 30 days after the Borrower's receipt of any such statement
which it deems to be incorrect.
2.12 LATE PAYMENT. In addition to any other rights the Bank may hereunder,
if any payment of principal (other than a principal payment due pursuant to
Section 2.3) or interest, or any portion thereof, under this Agreement is not
paid when due, a late payment charge equal to five percent (5%) of such past
due payment may be assessed and shall be immediately payable.
3. LETTERS OF CREDIT
3.1. LETTERS OF CREDIT. The Bank hereby agrees to issue Sight Credits,
Usance Credits and Standby Credits for and on behalf of Borrower provided that
the total Letter of Credit Obligations shall not exceed $1,000,000 subject,
however, to the further limitations of Section 5.1.
3.2 LETTER OF CREDIT GENERAL CONDITIONS.
(a) Letters of Credit may be issued to support the Borrower's normal
business operations.
(b) As a condition precedent to Bank's obligation to issue any
Letter of Credit hereunder, the Borrower shall pay to the Bank its standard
(published) issuance fees with respect to each Letter of Credit and shall
promptly pay, upon request, such other fees, commissions, costs and any
out-of-pocket expenses charged or incurred by the Bank with respect to any
Letter of Credit.
(c) The commitment by the Bank to issue Letters of Credit shall,
unless earlier terminated in accordance with the terms of the Agreement,
automatically terminate on the Expiration Date and no Letter of Credit shall
expire, and no draft under a Letter of Credit shall be payable on a date which
more than 90 days after the Expiration Date.
(d) Each Letter of Credit shall be in form and substance satisfactory
to the Bank, shall require (except in the case of a Standby Credit) as a
condition of payment the presentment of non-negotiable bills of lading in favor
the Bank or negotiable bills of lading payable to the order of the Bank, and
shall be in favor of beneficiaries satisfactory to the Bank, provided that the
Bank may refuse to issue a Letter of Credit due to the nature of the transaction
or its terms or in connection with any transaction where the Bank, due to the
beneficiary or the nationality or residence of the beneficiary, would be
prohibited by any applicable law, regulation or order from issuing such Letter
of Credit.
(e) Prior to the issuance of each Letter of Credit, but in no event
later than 10:00 a.m. (California time) on the day such Letter of Credit is to
be issued (which shall be a Business Day), the Borrower shall deliver to the
Bank the Bank's standard form of application for issuance of a letter of credit
with proper insertions, duly executed by Borrower.
3.3 DRAWINGS. Upon receipt from any beneficiary under a Letter of Credit
of a demand for payment under such Letter of Credit (each a "Drawing"), the
Bank shall promptly notify the Borrower. Each Drawing shall be payable in full
by the Borrower on the date thereof, without demand or notice of any kind. If
the Borrower desires to repay a Drawing from the proceeds of an Advance, the
Borrower may request an Advance in accordance with the terms and conditions of
this Agreement and, if disbursed on the date of such Drawing, shall be applied
in payment of such obligation by the Borrower. If any Drawing shall not be paid
when due in accordance with the terms of this Agreement, the Borrower shall
reimburse the Bank for each Drawing together with interest thereon until paid
at the Default Interest Rate. The obligation of the Borrower to reimburse the
Bank for Drawings shall be absolute, irrevocable, and unconditional under any
and all circumstances whatsoever and irrespective of any set-off, counterclaim
or defense to payment which the Borrower may have or have had against the Bank
(except such as may arise out of the Bank's gross negligence or willful
misconduct) or any other person, including, without limitation, and set-off,
counterclaim or defense based upon or arising out of:
(a) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
1998 CREDIT AGREEMENT-Page 7
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(b) any amendment or waiver of or consent to departure from the
terms of any Letter of Credit;
(c) the existence of any claim, set-off, defense or other right
which the Borrower or any other person may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any person for whom
any such beneficiary or any such transferee may be acting); or
(d) any allegation that any demand, statement or any other
document presented under any Letter of Credit is forged, fraudulent, invalid or
insufficient in any respect, or any statement therein being untrue or inaccurate
in any respect whatsoever or any variations in punctuation, capitalization,
spelling or format of the drafts or any statements presented in connecting with
any Drawing.
3.4 RELEASE OF DOCUMENTS. The Bank shall not be obligated to release
any documents accompanying a Drawing under a Sight Credit until such time as
the Borrower has paid the full amount of such Drawing. No past or future custom
or practice of releasing documents prior to receiving such payment shall
operate as a waiver of the Bank's right under this Subsection. From and after
the occurrence of an Event of Default and until such time as such Event of
Default has been cured or waived, the Bank shall not be obligated to release
documents accompanying a Drawing under any Usance Credit until such time as
the Borrower has deposited with the Bank, the full amount of such Drawing.
4. FX TRANSACTIONS
4.1 FOREIGN EXCHANGE FACILITY. The Bank agrees, as the Borrower's
request, to enter into FX Transactions with the Borrower from time to time
prior to the Expiration Date, provided that, at no time shall the aggregate FX
Risk Liability exceed $375,000.00 subject, however, to the further limitations
of Section 5.1.
4.2 REQUESTS FOR FX TRANSACTIONS. Each request for a FX Transaction
shall be made by telephone to the Bank's Treasury Department (each a "Request")
and may be confirmed in writing to the address specified in Section 10.5 below,
shall specify the currency to be purchased or sold, the amount of such currency
and the settlement date. Each Request shall be delivered or communicated to the
Bank no later than 3:00 p.m. (California time) on the day (which shall be a
Business Day) on which the FX Transaction is requested. By making any such
Request, Borrower agrees that all matters relating to each such FX Transaction
shall be governed by this Agreement and Borrower restates all warranties and
representations made by Borrower herein as if made on the date the FX
Transaction is entered into.
4.3 EXPIRATION DATE. The commitment by the Bank to enter into FX
Transactions shall, unless earlier terminated in accordance with this
Agreement, automatically terminate on the Expiration Date and no FX Transaction
shall expire on a date which is more than 90 days after the Expiration Date.
4.4 TENOR. No FX Transaction shall have a Settlement Date which is more
than 90 days after the Expiration Date.
4.5 AVAILABILITY. Bank may refuse to enter into a FX Transaction with
the Borrower where the Bank, in its sole discretion, determines that the
requested Foreign Currency is unavailable, if the Bank is not then dealing in
the requested Foreign Currency, or where Bank would be prohibited by any
applicable law, regulation or order from purchasing such Foreign Currency.
4.6 PURPOSE. The FX Transaction shall be used to hedge the Borrower's
foreign exchange exposure and/or risk and not for purposes of speculation.
4.7 PAYMENT. Payment is due on the Settlement Date of the respective FX
Transaction. Bank is hereby authorized by Borrower to charge the full
settlement price of any FX Transaction against the depository account or
accounts maintained by the Borrower with Bank on the Settlement Date. In the
event that Borrower fails to pay the settlement price of any Foreign Exchange
Contract on the relevant Payment Date, or the balances in the depository
account or accounts maintained by the Borrower with Bank are insufficient to
pay the settlement price on the Payment Date, without limiting the rights of
Bank under the Agreement or this Addendum or waiving any Event of Default
caused thereby, Bank may, and Borrower hereby authorizes Bank to create an
Advance bearing interest at the rate provided in the Agreement to pay the
settlement price on the Settlement Date.
4.8 REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default,
the Bank, may, at its sole and absolute discretion, without demand and only
upon such notice as may be required by law;
1998 CREDIT AGREEMENT-Page 8
9
(a) CLOSE-OUT AND LIQUIDATION. The Bank shall have the right to
close-out and liquidate all, but not less than all, the outstanding FX
Transactions (except to the extent that, in the good faith opinion of the Bank,
certain FX Transactions may not be closed-out and liquidated under applicable
law) in the following manner:
(1) Close-out and liquidation shall be effected by
closing-out each outstanding FX Transaction (including any FX Transaction which
has not been performed and in respect of which the Settlement Date is on or
proceeds the Close-Out Date) so that each FX Transaction is canceled. The Bank
shall then calculate, in good faith, as of the value of each such canceled FX
Transaction (the "Closing Value") by converting:
(A) in the case of an FX Transaction whose Settlement
Date is the same as or later than the Close-Out Date, the amount of the Foreign
Currency into U.S. Dollars at a rate of exchange at which the Bank can buy or
sell, as appropriate, U.S. Dollars with or against the Foreign Currency for
delivery on the Settlement Date of the respective FX Transaction, or
(B) in the case of an FX Transaction whose Settlement
Date precedes the Close-Out Date, converting the amount of the Foreign
Currency, adjusted by adding interest with respect thereto at the Variable
Interest Rate from the Settlement Date to the Close-Out Date, into U.S. Dollars
at a rate of exchange at which the Bank can buy or sell, as appropriate, U.S.
Dollars with or against the Foreign Currency for delivery on the Close-Out Date;
(2) With respect to a FX Transaction pursuant to which the
Bank agreed to purchase a Foreign Currency from the Borrower, the amount by
which the Closing Value as so determined exceeds the Notional Value is a
Closing Loss and the amount by which the Closing Value as so determined is less
than the Notional Value is a Closing Gain.
(3) With respect to a FX Transaction pursuant to which the
Bank agreed to sell a Foreign Currency to the Borrower, the amount by which the
Closing Value as so determined exceeds the Notional Value is Closing Gain and
the amount by which the Closing Value as so determined is less than the
Notional Value a Closing Loss.
(4) To the extent permitted by applicable law, the Closing
Gain or Closing Loss, as the case may be, for each Settlement Date falling after
the Close-Out Date will be adjusted (discounted) to its net present value (the
calculation of the amount of such adjustment shall be made by the Bank and
shall be conclusive as between the parties).
(5) To the extent the net amount of Closing Gains exceeds
Closing Losses, such amount shall be payable by the Bank to the Borrower. To
the extent the net amount of Closing Losses exceeds Closing Gains, such amount
shall be payable by Borrower. In the case of the latter, the Borrower promises
and agrees to pay interest on the amount so payable from the Close-Out Date
until paid at the Variable Rate.
(b) TERMINATION. Terminate any future obligation of the Bank with
respect to FX Transactions, without affecting the Borrower's obligations to the
Bank or the Bank's rights and remedies under this Agreement.
(c) RECORDING. Borrower agrees and consents that the Bank may
(but will not be required to) record mechanically by tape recorder or other
such device all telephonic communications between the Borrower, its officers,
employees or authorized representatives and the Bank with respect to FX
Transactions and that the Bank may retain the recordings for such periods as it
deems advisable. Any such recording shall be conclusive as to the substance of
such communications.
5. GENERAL LOAN TERMS
5.1 MAXIMUM CREDIT. The Bank shall not be under any obligation to make
an Advance, issue a Letter of Credit, or enter into an FX Transaction if,
immediately thereafter, the principal amount of Advances plus the Letter of
Credit Obligations plus the FX Risk Liability would exceed the Credit Limit.
1998 CREDIT AGREEMENT-Page 9
10
5.2. GUARANTIES. Borrower's payment of all Obligations and its full and
timely performance of the terms and conditions of the Agreement shall be
jointly and severally guaranteed in writing, in form and substance satisfactory
to the Bank (each a "Guaranty") by Align-Rite International, Ltd. and Align-Rite
International, Inc. (each a "Guarantor").
5.3. FACILITY FEE. The Borrower promises and agrees to pay to the Bank a
fee (the "Facility Fee") equal to three 16ths of one percent (0.1875%) per
annum times the difference between the average principal amount of Advances
outstanding under this Agreement and the Credit Limit. The Facility Fee shall
be payable on the first calendar day of each calendar quarter based on the
Advances outstanding and Credit Limit outstanding as of the calendar quarter
just ended.
5.4. COMPUTATION OF INTEREST AND FEES. Interest and any per annum fees
payable by the Borrower under this Agreement shall be computed on the basis of
360 days per year, but charged on the actual number of days elapsed.
5.5. NATURE AND PLACE OF PAYMENTS. All payments made on account of the
Obligations shall be made without setoff or counterclaim in lawful money of the
United States of America in either immediately available or next day available
funds, free and clear of and without deduction for any taxes, fees or other
charges of any nature whatsoever imposed by any taxing authority (other than
California and United States income tax payable by the Bank), and must be
received by Bank by 2:00 p.m. (California time) on the day of payment, it being
expressly agreed and understood that if payment is received by the Bank after
2:00 p.m. (California time), such payment will be considered to have been made
on the next succeeding Business Day and interest thereon shall be payable at
the then applicable rate during such extension. If any payment required to be
made by the Borrower hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the then applicable rate
during such extension. All payments required to be made hereunder shall be made
to the office of the Bank designated for the receipt of notices in Section 10.5
below or such other office as Bank shall from time to time designate.
6. CONDITIONS OF LENDING
6.1. CONDITIONS PRECEDENT TO THE INITIAL ADVANCE: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:
(a) Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any document, instrument or agreement
required hereunder have been duly authorized.
(b) The Bank has received each Guaranty together with evidence
that the execution, delivery and performance by signatory thereto has
been duly authorized by the respective Guarantor.
(c) Such other evidence as the Bank may request to establish the
consummation of the transaction contemplated hereunder and compliance
with the conditions of this Agreement.
6.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT: The obligation of
the Bank to make each Advance, issue each Letter of Credit and enter into each
FX Transaction to or on account of the Borrower (including the initial Advance
and the first extension of credit) shall be subject to the further conditions
precedent that, on the date thereof and immediately after such extension of
credit:
(a) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.
(b) The representations contained in Section 7 and in any other
document, instrument or certificate delivered to the Bank hereunder are
true, correct and complete.
(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.
The Borrower's acceptance of the proceeds of any Advance or the
Borrower's execution of any document or instrument evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.
1998 CREDIT AGREEMENT-Page 10
11
7. REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to
the Bank, which representations and warranties are continuing:
7.1. STATUS. The Borrower is a corporation duly organized and validly
existing under the laws of the State of Nevada, 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.
7.2. 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: (a) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(b) 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; or (c) require any consent or approval of its stockholders or violate
any provision of its articles of incorporation or by-laws.
7.3. LEGAL EFFECT. This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
7.4. FICTITIOUS TRADE STYLES. The Borrower does not use any fictitious
trade styles in connection with its business operations. The Borrower shall
notify the Bank not less than 30 days prior to effecting any change in the
matters described below or prior to using any other fictitious trade style at
any future date, indicating the trade style and state(s) of its use.
7.5. FINANCIAL STATEMENTS. All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein. Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
7.6. 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 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.
7.7. TITLE TO ASSETS. The Borrower has good and marketable title to all
of its assets and the same are not subject to any security interest,
encumbrance, lien or claim of any third person except for Permitted Liens.
7.8. ERISA. If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
7.9. TAXES. The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest
or those which are being duly contested in good faith.
7.10. MARGIN STOCK. The proceeds of any Advance under the Line of Credit
will not be used to purchase or carry margin stock as such term is defined
under Regulation U of the Board of Governors of the Federal Reserve System.
7.11. ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply,
and during the term of this Agreement will at all times comply, in all respects
with all Environmental Laws; the Borrower has obtained all licenses, permits,
authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary course operations, all
such Environmental Permits are in good standing, and the Borrower is
1998 CREDIT AGREEMENT-Page 11
12
In compliance with all material terms and conditions of such Environmental
Permits; neither the Borrower nor any of its present property or operations is
subject to any outstanding written order from or agreement with any
governmental authority nor subject to any judicial or docketed administrative
proceeding, respecting any Environmental Law, Environmental Claim or Hazardous
Material; there are no Hazardous Materials or other conditions or circumstances
existing, or arising from operations prior to the date of this Agreement, with
respect to any property of the Borrower that would reasonably be expected to
give rise to Environmental Claims; provided, however, that with respect to
property leased from an unrelated third party, the foregoing representation is
made to the best knowledge of the Borrower. In addition, (i) the Borrower does
not have any underground storage tanks (x) that are not properly registered or
permitted under applicable Environmental Laws, or (y) that are leaking or
disposing of Hazardous Materials off-site, and (ii) the Borrower has notified
all of their employees of the existence, if any, of any health hazard arising
from the conditions of their employment and have met all notification
requirements under Title III of CERCLA and all other Environmental Laws.
8. COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement,
and so long thereafter as the Borrower is indebted to the Bank under this
Agreement, the Borrower will, unless the Bank shall otherwise consent in
writing.
8.1 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 the annual financial report of the Borrower for
such year, prepared and certified by the Borrower.
(b) Not later than 45 days after the end of each of the first three
fiscal quarters of each of the Borrower's fiscal year's Borrower's, a copy
of the Borrower's financial statement as of such quarter end.
(c) Upon request by the Bank, a copy of the Borrower's most recent
federal income tax returns.
(d) Upon request by the Bank, an aging of accounts receivable and an
aging of accounts payable as of the immediately preceding month end.
(e) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder as
the Bank may reasonably request.
8.2 FINANCIAL CONDITION. The Borrower promises and agrees, during the
term of this Agreement and until payment in full of all of the Borrower's
obligations, the Borrower will maintain:
(a) A minimum Effective Tangible Net Worth of at least
$12,000,000.00.
(b) A ratio of Debt to Effective Tangible Net Worth of not more than
1.0 to 1.0.
(c) A ratio of current assets to current liabilities (excluding
accounts payable relating to the purchase of equipment which would,
according to GAAP, be capitalized) of not less than 1.25 to 1.0.
(d) A ratio of the sum of cash, cash equivalents and accounts
receivable to current liabilities (excluding accounts payable relating to
the purchase of equipment which would, according to GAAP, be capitalized)
of not less than 0.75 to 1.0.
(e) A minimum net profit after tax of at least $750,000 at the end of
the second fiscal quarter and at least $1,500,000.00 at each fiscal
year-end.
(f) A Debt Coverage Ratio as of the end of each fiscal quarter of
not less than 1.50 to 1.0.
8.3 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS: Maintain
and preserve its existence and all rights and privileges now enjoyed; and
conduct its business and operations in accordance with all applicable laws,
rules and regulations.
1998 CREDIT AGREEMENT - Page 12
13
8.4 MERGE OR CONSOLIDATE. Not liquidate or dissolve, merge or
consolidate with or into, or acquire any other business organization.
8.5. 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. Upon the Bank's request, the Borrower shall
furnish the Bank with the original policy or binder of all such insurance.
8.6 PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.
8.7. INSPECTION RIGHTS AND ACCOUNTING RECORDS: The Borrower will maintain
adequate books and records in accordance with generally accepted accounting
principals consistently applies and in a manner otherwise acceptable to Bank,
and, 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, all at the Borrower's
expense, the amount of which shall be payable immediately upon demand. 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
demand.
8.8. PAYMENT OF DIVIDENDS: Not declare or pay any dividends on any class
of stock now or hereafter outstanding except dividends payable solely in the
Borrower's capital stock.
8.9. REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding.
9.10. 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 Business.
8.11. 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 (a) credit extended in the Ordinary Course of Business and (b) loans
to Align-Rite Ltd., or Align-Rite International Inc. (PK) to facilitate the
payment of indebtedness owed by the Borrower's affiliates to the Bank.
8.12. 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 or 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.
8.13. TRANSFER ASSETS: 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 full, fair and
reasonable consideration.
8.14. CHANGE IN NATURE OF BUSINESS: Not make any material change in its
financial structure or the nature of its business as existing or conducted as
of the date hereof.
8.15. 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
$500,00.00; (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 (iv) any enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or threatened
against the Borrower or any of its properties.
1998 CREDIT AGREEMENT -- Page 13
14
8.16. ENVIRONMENTAL COMPLIANCE. The Borrower shall conduct its operations
and keep and maintain all of its property in compliance with all Environmental
Laws and, upon the written request of the Bank, the Borrower shall submit to
the Bank, at the Borrower's sole cost and expense, at reasonable intervals, a
report providing the status of any environmental, health or safety compliance,
hazard or liability.
9. DEFAULT
9.1. 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:
(a) NON-PAYMENT: The Borrower shall fail to pay the principal amount
of any Obligations when due or interest on the Obligations within 10 days
of when due.
(b) PERFORMANCE UNDER THIS AGREEMENT: 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
relating to this Agreement and any such failure shall continue unremedied
for more than 30 days after the occurrence thereof.
(c) 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.
(d) OTHER AGREEMENTS: If there is a default under any agreement to
which Borrower is a party with the Bank or with a third party or parties
resulting in a right by the Bank or such third party or parties, whether
or not exercised, to accelerate the maturity of any Indebtedness.
(3) 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 30 days after the date of such appointment.
(f) 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 30 days after the issuance
or attachment of such writ or lien.
(g) REVOCATION OR LIMITATION OF GUARANTY: Any Guaranty shall be
revoked or limited or its enforceability or validity shall be contested by
any Guarantor, by operation of law, legal proceeding or otherwise or a
Guarantor shall fail to observe any covenant or agreement contained is its
respective Guaranty.
(h) 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.
(i) MATERIAL ADVERSE CHANGE: If there occurs a material change in
the Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations.
(j) CHANGE IN OWNERSHIP: If 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 10% of
the issued and outstanding capital stock of the Borrower.
(k) CONSOLIDATED FINANCIAL CONDITION: Align-Rite International, Inc.
shall fail to maintain, on a consolidated basis:
1998 CREDIT AGREEMENT-Page 14
15
(1) A minimum Effective Tangible Net Worth of at least
$32,500,000.00.
(2) A ratio of Debt to Effective Tangible Net Worth of not more
than 1.0 to 1.0.
(3) A ratio of Current Assets to current liabilities of not less
than 1.50 to 1.0. Current liabilities exclude A/P relating to the
purchase of equipment which according to GAAP would be capitalized.
9.2. REMEDIES. Upon the occurrence of any Event of Default, the Bank may,
at its sole and absolute election, without demand and only upon such notice as
may be required by law:
(a) 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.
(b) CEASE EXTENDING CREDIT: Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement
or under any other agreement now existing or hereafter entered into between
the Borrower and the Bank.
(c) SECURE LETTERS OF CREDIT: Require Borrower to deposit with Bank an
amount equal to the then existing Letter of Credit Obligations.
(d) TERMINATION: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank or the
Bank's rights and remedies under this Agreement or under any other
document, instrument or agreement.
(e) NON-EXCLUSIVITY OF REMEDIES: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement now
existing or hereafter entered into between the Borrower and the Bank, or
otherwise.
10. MISCELLANEOUS
10.1. AMOUNTS PAYABLE ON DEMAND. If the Borrower shall fail to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.
10.2 DEFAULT INTEREST RATE. If an Event of Default, or an event which,
with notice or passage of time could become an Event of Default, has occurred or
is continuing, the Borrower shall pay to the Bank interest on any indebtedness
or amount payable under this Agreement at a rate which is 3% in excess of the
rate or rates then in effect under this Agreement (the "Default Interest Rate").
10.3 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.
10.4 ATTORNEY'S 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, including any
bankruptcy, appeal or the enforcement of any judgment or any refinancing or
restructuring of this Agreement or any document, instrument or agreement
executed with respect to, evidencing or securing the indebtedness hereunder.
10.5 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 facsimile
delivery, or to such other address as may be specified from time to time in
writing by either party to the other.
1998 CREDIT AGREEMENT-Page 15
16
- -------------------------------------------------------------------------------
To the Bank: To the Borrower:
Sanwa Bank California Align-Rite Corporation
Newport Beach Commercial Banking Center 2428 Ontario Street
4400 MacArthur Blvd Burbank, California 91504
Suite 200 Attn:
Newport Beach, California 92660 --------------------------------
Attn: Dan Wilson
- -------------------------------------------------------------------------------
10.6. 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.
10.7. 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.
10.8. 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.
10.9. JURISDICTION. This Agreement, any notes issued hereunder, and
any documents, instruments or agreements mentioned or referred to herein shall
be governed by and construed according to the laws of the State or California,
to the jurisdiction of whose courts the parties hereby submit.
10.10. 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.
10.11. AMENDMENT. This Agreement may be amended or modified only by an
instrument in writing signed by the Bank and the Borrower.
10.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts all such counterparts taken together shall be deemed to
constitute on and the same instrument.
10.13. HEADINGS. The headings herein set forth are solely for the
purpose of identification and have no legal significance.
10.14. 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.
1998 CREDIT AGREEMENT-Page 16
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA ALIGN-RITE CORPORATION
By: /s/ SANDRA RUSH By: /s/ JAMES MACDONALD
------------------------------ ------------------------------
Sandra Rush, V.P. James MacDonald
------------------------------ Chairman & President
(name/title) ------------------------------
(name/title)
By: /s/ PETER KATURICH
------------------------------
PETER KATURICH / CFO
-------------------------------
(name/title)
1998 CREDIT AGREEMENT-Page 17