EXHIBIT 10.1
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of March 1, 1997, by and between SEATTLE
FILMWORKS, INC., a Washington corporation, OPTICOLOR, INC., a Washington
corporation, and SEATTLE FILMWORKS MANUFACTURING COMPANY, INC., a Washington
corporation (collectively, "Borrowers," and each individually, a "Borrower";
Seattle Filmworks, Inc. shall sometimes be referred to herein as "Parent
Company"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
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A. Borrowers have requested from Bank the credit
accommodation described below, and Bank has agreed to provide said credit
accommodation to Borrowers on the terms and conditions contained herein.
B. Borrowers and Bank are parties to that Certain Loan
Agreement, dated April 10, 1996, as amended (the "Original Credit Agreement"),
and Borrowers and Bank wish to supersede such agreement with this Agreement and
extend and amend the credit facilities provided thereunder, as set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrowers hereby agree as follows:
ARTICLE I
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THE CREDIT
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SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this Agreement,
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Bank hereby agrees to make advances to Borrowers, or any of them, from time to
time up to and including March 31, 1998, not to exceed at any time the aggregate
principal amount of Six Million Dollars ($6,000,000.00) ("Line of Credit"), the
proceeds of which shall be used to finance Borrower's working capital
requirements, to repurchase Parent Company's outstanding common stock, and to
finance Acquisitions (as such term is defined below), which are permitted under
Section 5.4 hereof. Borrowers' obligation to repay advances under the Line of
Credit shall be evidenced by a promissory note substantially in the form of
Exhibit A attached hereto ("Line of Credit Note"), all terms of which are
incorporated herein by this reference. As of the date hereof, the Line of
Credit Note shall supersede in its entirety the Convertible Line Note (as such
term is defined in the Original Credit Agreement), and the outstanding balance
of such Convertible Line Note as of the date hereof shall become the initial
balance of the Line of Credit Note.
(b) Letter of Credit Subfeature. As a subfeature under the Line of Credit,
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Bank agrees from time to time during the term thereof to issue commercial
letters of credit for the account of Borrowers for general working capital
purposes (each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however, that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and provided further, that
the aggregate undrawn amount of all outstanding Letters of Credit shall not at
any time exceed Six Million Dollars ($6,000,000.00). Each Letter of Credit
shall be issued for a term not to exceed One Hundred Eighty (180) days, as
designated by the Borrower requesting such Letter of Credit; provided however,
that no Letter of Credit shall have an expiration date subsequent to the
maturity date of the Line of Credit. The undrawn amount of all Letters of
Credit shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit shall be subject to the additional
terms and conditions of the Letter of Credit Agreement and related documents, if
any, required by Bank in connection with the issuance thereof (each, a "Letter
of Credit Agreement" and collectively, "Letter of Credit Agreements"). Each
draft paid by Bank under a Letter of Credit shall be deemed an advance under the
Line of Credit and shall be repaid by Borrowers in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however, that
if advances under the Line of Credit are not available, for any reason, at the
time any draft is paid by Bank, then Borrowers shall immediately pay to Bank the
full amount of such draft, together with interest thereon from the date such
amount is paid by Bank to the date such amount is fully repaid by Borrowers, at
the rate of interest applicable to advances under the Line of Credit. In such
event Borrowers agree that Bank, in its sole discretion, may debit any demand
deposit account maintained by any Borrower with Bank for the amount of any such
draft.
(c) Borrowing and Repayment. Borrowers may from time to time during the
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term of the Line of Credit borrow, partially or wholly repay their outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
(d) Conversion of Line of Credit. Subject to the terms and conditions
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hereof, the principle balance of the Line of Credit outstanding on March 31,
1998, which is not in excess of $3,000,000.00, shall automatically be converted
to a term loan (the "Converted Term Loan"). Any amount of principal balance in
excess of $3,000,000.00 shall be due and payable on such date in accordance with
the terms of the Line of Credit Note. The
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obligation of Borrowers to repay the Converted Term Loan shall be evidenced by a
promissory note substantially in the form of Exhibit B attached hereto
("Converted Term Loan Note"), all terms of which are incorporated herein by this
reference. Principal and interest on the Converted Term Loan shall be repaid in
accordance with the provisions of the Converted Term Loan Note. Borrowers may
prepay principal on the Converted Term Loan solely in accordance with the
provisions of the Converted Term Loan Note.
(e) Certain Definitions.
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(i) The term "Acquisition" means the purchase by any Borrower of all
or substantially all of the assets, business, stock, partnership interests, or
membership interests, as the case may be, of any Person(as such term is defined
below), or the purchase or acquisition by any Borrower of any Person through a
merger or consolidation in which the surviving entity is any Borrower; provided,
however, that (i) the purpose of each such transaction shall be to acquire or
consolidate with a business which is in substantially the same line of business
as Borrowers, taken as a whole, (ii) the Acquisition shall not constitute,
result in, create any condition that constitutes or with the passage of time is
likely to constitute an Event of Default; and (iii) the Acquisition shall be
conducted in accordance with all applicable laws and regulations.
(ii) The term "Target" means the Person whose stock, assets or
business shall be acquired by, merged into or with, or consolidated with any
Borrower in an Acquisition.
(iii) The term "Permitted Acquisition" means an Acquisition in any
given fiscal year which meets the following conditions: The aggregate
consideration paid or to be paid in the Acquisition for the assets or business
to be acquired from the Target, or the stock, partnership interests or
membership interests of the Target (whether paid or to be paid in the form of
cash, stock, contingent or non-contingent liabilities assumed, or other
consideration) (collectively, "Aggregate Consideration") shall not, when
combined with (i) all such consideration paid or to be paid with respect to all
other Permitted Acquisitions that have been consummated in such fiscal year as
of the date of the proposed Acquisition, and (ii) the aggregate of all other
fixed asset and capital asset investments by Borrowers during such fiscal year
as of the date of the proposed Acquisition, does not exceed the greater of (A)
$6,000,000.00, less outstanding bank debt, or (B) Borrowers' consolidated cash
and marketable securities, less outstanding bank debt, as reported by Parent
Company in its most recent report filed with the SEC on Form 10-Q or 10-K.
(iv) The term "Person" means any natural person,
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corporation, limited partnership, general partnership, joint venture,
association, company, trust, business or other organization, whether or not
legal entities.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit
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shall bear interest at the rate of interest set forth in the Line of Credit
Note, and the outstanding principal balance of the Converted Term Loan shall
bear interest at the rate of interest set forth in the Converted Term Loan Note.
The amount of each draft paid by Bank under any Letter of Credit shall bear
interest from the date such draft is paid by Bank to the date such amount is
fully repaid by Borrower.
(b) Computation and Payment. Interest shall be computed on the basis of a
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365-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note and the Converted Term Loan Note, as
applicable.
(c) Commitment Fee. Borrower shall pay to Bank a non-refundable commitment
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fee for the Line of Credit equal to $7,200.00, which fee shall be due and
payable in full upon the execution of this agreement.
(d) Letter of Credit Fees. Borrower shall pay to Bank fees upon the
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issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
(e) Conversion Fee. Borrower shall pay to Bank a non-refundable conversion
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fee upon conversion of any portion of the Line of Credit to the Converted Term
Loan equal to one-eight of one percent (1/8%) of the outstanding balance of the
Convertible Line converted to the Converted Term Loan on the date of conversion.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest and fees due under the Line of Credit and the Converted Term Loan
by charging Borrower's demand deposit account number ___________ with Bank, or
any other demand deposit account maintained by Borrower with Bank, for the full
amount thereof. Should there be insufficient funds in any such demand deposit
account to pay all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Each Borrower makes the following representations and warranties to Bank,
with respect to itself and each other Borrower, and jointly and severally with
each other Borrower, which representations and warranties shall survive the
execution of this Agreement and shall continue in full force and effect until
the full and final payment, and satisfaction and discharge, of all obligations
of Borrowers to Bank subject to this Agreement.
SECTION 2.1. LEGAL STATUS; OWNERSHIP OF STOCK. Each Borrower is a
corporation, duly organized and existing and in good standing under the laws of
the State of Washington, and is qualified or licensed to do business (and is in
good standing as a foreign corporation, if applicable) in all jurisdictions in
which such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower.
Parent Company owns all of the outstanding capital stock of each of the other
Borrowers.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Line of
Credit Note, the Converted Term Loan Note, and each other document, contract and
instrument required hereby or at any time hereafter delivered to Bank in
connection herewith (collectively, the "Loan Documents") have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrowers or the party which executes the same, enforceable in
accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrowers of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of any Borrower, or result in any breach of or default under any
contract, obligation, indenture or other instrument to which any Borrower is a
party or by which any Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of any
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of any Borrower other than those disclosed by
Parent Company to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The
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consolidated financial statement of Borrowers dated September 28, 1996, a true
copy of which has been delivered by Borrowers to Bank prior to the date hereof,
(a) is complete and correct and presents fairly the financial condition of
Borrowers on a consolidated and consolidating basis, (b) discloses all
liabilities of Borrowers that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrowers, or any of them, nor has any Borrower
mortgaged, pledged, granted a security interest in or otherwise encumbered any
of its assets or properties except in favor of Bank or as otherwise permitted by
Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. No borrower has any knowledge of any
pending assessments or adjustments of any Borrower's income tax payable with
respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which any Borrower is a party or by which any Borrower may be
bound that requires the subordination in right of payment of any obligations of
Borrowers subject to this Agreement to any other obligation of any Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Each Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
SECTION 2.9. ERISA. Each Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended or recodified from time to time ("ERISA"); No
Borrower has violated any provision of any defined employee pension benefit plan
(as defined in ERISA) maintained or contributed to by any Borrower (each, a
"Plan"); no Reportable Event as defined in ERISA has occurred and is continuing
with respect to any Plan initiated by any Borrower; each Borrower has met its
minimum funding requirements under ERISA with respect to each Plan; and each
Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally accepted accounting
principles.
SECTION 2.10. OTHER OBLIGATIONS. No Borrower is in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract,
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instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Parent
Company to Bank in writing prior to the date hereof, each Borrower is in
compliance in all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any operations
and/or properties of any Borrower, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to
time. None of the operations of any Borrower is the subject of any federal or
state investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. No Borrower has any material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
ARTICLE III
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CONDITIONS
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SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
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extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
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satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Line of Credit Note.
(ii) Corporate Borrowing Resolutions from each Borrower.
(iii) Certificate of Incumbency from each Borrower.
(iv) Continuing Commercial Letters of Credit Agreement.
(v) Such other documents as Bank may require under any other Section of
this Agreement.
(c) Financial Condition. There shall have been no material adverse change,
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as determined by Bank, in the financial condition or business of any Borrower or
of Borrowers taken as a whole, nor any material decline, as determined by Bank,
in the market value of any collateral required hereunder or a substantial or
material portion of the assets of any Borrower.
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(d) Insurance. Borrowers shall have delivered to Bank evidence of
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insurance coverage on all property of each Borrower, in form, substance,
amounts, covering risks and issued by companies satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by any Borrower hereunder
shall be subject to the fulfillment to Bank's satisfaction of each of the
following conditions:
(a) Compliance. The representations and warranties contained herein and in
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each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents which
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may be required in connection with such extension of credit.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Each Borrower covenants that so long as Bank remains committed to extend
credit to any Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of any Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrowers subject hereto, each Borrower shall, unless Bank otherwise consents
in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of such Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of
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the following, in form and detail satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal year, a
consolidated and consolidating financial statement of Borrowers, prepared by a
certified public accountant acceptable to Bank, to include balance sheet, income
statement, statement of cash flow, and Parent Company's Annual Report on
Securities and Exchange Commission ("SEC") Form 10-K for such fiscal year;
(b) not later than 45 days after and as of the end of each fiscal quarter,
Parent Company's Quarterly Report on SEC Form 10-Q for such fiscal quarter;
(c) not later than 45 days after and as of the end of each calendar
quarter, a report specifying the number of shares of Parent Company's common
stock repurchased during such quarter, and, if the aggregate amount spent on
such repurchases exceeds $500,000.00, the amount spent in such quarter;
provided, however, that no such report shall be required for any quarter in
which no advances were made under the Line of Credit, unless proceeds of any
Line of Credit advance were used in that quarter to repurchase shares of Parent
Company's common stock, regardless of when the advance was made.
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which such Borrower is organized and/or which govern such Borrower's
continued existence and with the requirements of all laws, rules, regulations
and orders of any governmental authority applicable to such Borrower and/or its
business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of such
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to such
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and
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discharge when due any and all indebtedness, obligations, assessments and taxes,
both real or personal, including without limitation federal and state income
taxes and state and local property taxes and assessments, except such (a) as
such Borrower may in good faith contest or as to which a bona fide dispute may
arise, and (b) for which such Borrower has made provision, to Bank's
satisfaction, for eventual payment thereof in the event such Borrower is
obligated to make such payment.
SECTION 4.8. FINANCIAL CONDITION. Maintain Borrowers' financial
condition, determined on a consolidated basis, as follows using generally
accepted accounting principles consistently applied and used consistently with
prior practices (except to the extent modified by the definitions herein):
(a) Net income after taxes not less than $1.00 on a year-to-date basis,
determined as of each fiscal quarter end.
(b) Net Worth measured quarterly at the end of each fiscal quarter, not
less than $20,000,000.00, with "Net Worth" defined as total stockholders'
equity.
(c) Total Liabilities divided by Net Worth not at any time greater than 1.5
to 1.0, with "Total Liabilities" defined as the aggregate of current liabilities
and non-current liabilities, and with "Net Worth" as defined above.
(d) Debt Service Coverage Ratio not less than 1.5 to 1.0 as of each fiscal
year end, with Debt Service Coverage Ratio defined as the sum of net profit
before tax, depreciation expense, interest expense (net of capitalized interest
expense), and dividends, divided by the sum of the current maturity of long-term
debt, total interest expense and dividends.
SECTION 4.9. NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of any Borrower; (c) the occurrence and nature of
any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which any Borrower is required to maintain,
or any uninsured or partially uninsured loss through liability or property
damage, or through fire, theft or any other cause affecting any Borrower's
property.
SECTION 4.10. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$1,000,000.00.
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ARTICLE V
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NEGATIVE COVENANTS
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Each Borrower further covenants that so long as Bank remains committed to
extend credit to any Borrower pursuant hereto, or any liabilities (whether
direct or contingent, liquidated or unliquidated) of any Borrower to Bank under
any of the Loan Documents remain outstanding, and until payment in full of all
obligations of Borrowers subject hereto, such Borrower will not without Bank's
prior written consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in
fixed or capital assets in any fiscal year, which, when combined with (a) all
other investments in fixed or capital assets made by Borrowers in such fiscal
year as of the date of such proposed additional investment, and (b) the
Aggregate Consideration (as such term is defined in Section 5.4 hereof) paid by
Borrowers in Permitted Acquisitions (as such term is defined in Section 5.4) in
such fiscal year as of such date, exceeds the greater of (i) $6,000,000.00, less
outstanding bank debt, or (ii) Borrowers' consolidated cash and marketable
securities, less outstanding bank debt, in either case as reported by Parent
Company in its most recent report filed with the SEC on Form 10-Q or 10-K.
Notwithstanding the foregoing, no additional investment in fixed or capital
assets shall be made if Parent Company is then delinquent in filing its annual
or quarterly report on Form 10-Q or Form 10-K with the SEC.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, or assume any Other
Indebtedness (as such term is defined below) in excess of $500,000.00 in any
fiscal year; provided, however, that any Borrower or Borrowers may enter into a
capital lease in any fiscal year if the total lease payments required for the
life of such lease, when combined with (A) the aggregate of all other lease
payments required for the life of all other capital leases entered into by
Borrower or any Borrower during such fiscal year as of the date of such proposed
capital lease, and (B) the aggregate of all fixed asset and capital asset
investments by Borrowers during such fiscal year as of the date of such proposed
capital lease, do not exceed the greater of the limits set forth in clauses (i)
and (ii) of Section 5.2 hereof. The term "Other Indebtedness" shall mean any
indebtedness or liabilities of any Borrower resulting from a borrowing, loan or
advance, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except any liability of Borrowers
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to Bank.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS, ACQUISITION OF
ASSETS OR STOCK. Merge into or consolidate with any other entity, other than a
Permitted Acquisition; make any substantial change in the nature of Borrower's
business as conducted as of the date hereof; acquire all or substantially all of
the assets or capital stock of any other entity, other than a Permitted
Acquisition; nor sell, lease, transfer or otherwise dispose of all or a
substantial or material portion of Borrower's assets except in the ordinary
course of its business. Notwithstanding the foregoing, Borrower is not
prohibited hereunder from consummating any Acquisition which can be accounted
for as a "pooling of interests," as defined under generally accepted accounting
principles as in effect on the date of any such transaction. No Permitted
Acquisition may be consummated if Parent Company is then delinquent in filing
its annual or quarterly report on Form 10-Q or 10-K with the SEC. Borrower
shall promptly notify Bank of any Permitted Acquisition in which the Aggregate
Consideration exceeds $1,000,000.00.
SECTION 5.7. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of any Borrower as security
for, any liabilities or obligations of any other Person, except (a) any of the
foregoing in favor of Bank, and (b) any guaranty of indebtedness of any wholly-
owned subsidiary of any Borrower or any Fifty Percent Affiliate (as such term is
defined below), provided that, in the aggregate, such guaranties (including any
guaranties existing as of the date hereof) do not exceed $5,000,000.00 at any
time. The term "Fifty Percent Affiliate" means any corporation or other
business entity in which any Borrower owns fifty percent (50%) or more of the
capital stock or other equity interest.
SECTION 5.8. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments (other than Permitted Acquisitions) in any Person, except (a) any
of the foregoing existing as of, and disclosed to Bank prior to, the date
hereof, and (b) loans, advances and investments (other than Permitted
Acquisitions) to or in any wholly-owned subsidiary of any Borrower or any Fifty
Percent Affiliate (as such term is defined in Section 5.7 hereof), provided
that, in the aggregate, such loans, advances and investments (including any such
loans, advances and investments in existence as of the date hereof) do not
exceed the greater of the limits set forth in clauses (i) and (ii) of Section
5.2 hereof, when combined with the Aggregate Consideration paid by Borrowers in
Permitted Acquisitions as of any date.
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SECTION 5.9. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on any stock of any
Borrower now or hereafter outstanding, nor redeem, retire, repurchase or
otherwise acquire any shares of any class of stock of any Borrower now or
hereafter outstanding; provided, however, that Parent Company may repurchase
outstanding shares of its common stock so long as Parent Company does not pay
more than $5,000,000.00, in the aggregate, for such repurchased stock in any
fiscal year.
SECTION 5.10. TRANSFER OR ISSUANCE OF SUBSIDIARY STOCK.
Transfer or issue any shares of capital stock of any Borrower other than Parent
Company.
ARTICLE VI
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EVENTS OF DEFAULT
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SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Any Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by any Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which any Borrower has incurred any
debt or other liability to any Person including Bank; provided, however, that
such a default or event of default shall not constitute an Event of Default
hereunder if it is with respect to any contract or instrument for debt in favor
of any Person other than Bank, and either (1) the effect of such default or
event of default is to accelerate or permit the acceleration of the maturity of
indebtedness of less than $500,000.00, or (ii) the default or event of default
is in excess of $500,000.00, but not in excess of $2,000,000.00, it is being
contested by Borrowers in good faith by appropriate proceedings, and adequate
reserves have been provided for such default or event of default if so required
by
--13--
generally accepted accounting principles, consistently applied.
(e) The filing of a notice of judgment lien against any Borrower; or the
recording of any abstract of judgment against any Borrower in any county in
which any Borrower has an interest in real property; or the service of a notice
of levy and/or of a writ of attachment or execution, or other like process,
against the assets of any Borrower; or the entry of a judgment against any
Borrower.
(f) Any Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors; any
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against any
Borrower, or any Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or any Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered against
any Borrower by any court of competent jurisdiction under the Bankruptcy Code or
any other applicable state or federal law relating to bankruptcy, reorganization
or other relief for debtors.
(g) The dissolution or liquidation of any Borrower; or any Borrower, or any
of its directors, stockholders or members, shall take action seeking to effect
the dissolution or liquidation of any Borrower.
(h) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Parent
Company other than in the course of normal trading activity in the public
market.
(i) The sale, transfer, hypothecation, assignment or encumbrance, whether
voluntary, involuntary or by operation of law, without Bank's prior written
consent, of all or any part of or interest in any real property collateral
required hereby.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrowers under each of the Loan Documents, any term thereof
to the contrary notwithstanding,
--14--
shall at Bank's option and without notice become immediately due and payable
without presentment, demand, protest or notice of dishonor, all of which are
hereby expressly waived by each Borrower; (b) the obligation, if any, of Bank to
extend any further credit or convert the Line of Credit to the Converted Term
Loan under any of the Loan Documents shall immediately cease and terminate; and
(c) Bank shall have all rights, powers and remedies available under each of the
Loan Documents, or accorded by law, including without limitation the right to
resort to any or all security for any credit accommodation from Bank subject
hereto and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law. All rights, powers and remedies of Bank may be
exercised at any time by Bank and from time to time after the occurrence of an
Event of Default, are cumulative and not exclusive, and shall be in addition to
any other rights, powers or remedies provided by law or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWERS: SEATTLE FILMWORKS, INC., OPTICOLOR, INC.,
AND SEATTLE FILMWORKS MANUFACTURING
COMPANY
0000 00xx Xxxxxx X
Xxxxxxx, XX 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Puget Sound RCBO AU# 3835
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the
--15--
earlier of the date of receipt or three (3) days after deposit in the U.S. mail,
first class and postage prepaid; and (c) if sent by telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other Person) relating to any
Borrower or any other Person.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank
may disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit extended by Bank to any Borrower, any Borrower or
its business, or any collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrowers and Bank with
respect to any extension of credit by Bank subject hereto and supersede all
prior agreements, negotiations, communications, discussions and correspondence
concerning the subject matter hereof, including, without limitation, the
Original Loan Agreement. This Agreement may be amended or modified only in
writing signed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other Person shall be a
third party beneficiary
--16--
of, or have any direct or indirect cause of action or claim in connection with,
this Agreement or any other of the Loan Documents to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
-----------
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who
fails or refuses to submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other party in
compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by the
---------------
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in
--17--
any of the Loan Documents. The arbitration shall be conducted at a location in
Washington selected by the AAA or other administrator. If there is any
inconsistency between the terms hereof and any such rules, the terms and
procedures set forth herein shall control. All statutes of limitation applicable
to any Dispute shall apply to any arbitration proceeding. All discovery
activities shall be expressly limited to matters directly relevant to the
Dispute being arbitrated. Judgment upon any award rendered in an arbitration may
be entered in any court having jurisdiction; provided however, that nothing
contained herein shall be deemed to be a waiver by any party that is a bank of
the protection afforded to it under 12 U.S.C. (S)91 or any similar applicable
state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
----------------------------------------------------------
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
--------------------------------------------
active members of the Washington State Bar or retired judges of the state or
federal judiciary of Washington, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of Washington, (ii) may grant
any remedy or relief that a court of the state of Washington could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the Washington Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
--18--
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
---------------
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Washington, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Washington. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of Washington.
(f) Miscellaneous. To the maximum extent practicable, the AAA, the
-------------
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
SECTION 7.12. JOINT AND SEVERAL LIABILITY
(a) Each Borrower has determined and represents to Bank that it is in its
best interests and in pursuance of its legitimate business purposes to induce
Bank to extend credit pursuant to this Agreement. Each Borrower acknowledges
and represents that its business is related to the business of the other
Borrower, the availability of the commitments provided for herein benefits all
Borrowers, and advances and other credit extensions made hereunder will be for
and inure to the benefit of all Borrowers, individually and as a group.
--19--
(b) Each Borrower has determined and represents to Bank that it has, and
after giving effect to the transactions contemplated by this Agreement will
have, assets having a fair saleable value in excess of its debts, after giving
effect to any rights of contribution or subrogation which may be available to
such Borrower, and each Borrower has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts as such debts
mature.
(c) Each Borrower agrees that it is jointly and severally liable to Bank
for, and each Borrower agrees to pay to Bank when due the full amount of, all
indebtedness now existing or hereafter arising to Bank under or in connection
with the Line of Credit and all modifications, extensions and renewals thereof,
including without limitation all advances disbursed to any Borrower under the
Line of Credit, all interest which accrues thereon, all fees, costs and expenses
chargeable to Borrowers or any of them in connection therewith, all Letters of
Credit issued for the account of any Borrower, all reimbursement obligations
thereunder, all interest which accrues on the unreimbursed amount of any drafts
paid by Bank thereunder, and all fees, costs and expenses chargeable to
Borrowers or any of them in connection therewith. The obligations of Borrowers
to Bank for the Line of Credit and the Converted Term Loan hereunder shall be in
addition to any obligations of Borrowers or any Borrower to Bank under any other
agreement hereafter given to Bank unless said other agreement is expressly
modified or revoked in writing, and this Agreement shall not, unless expressly
herein provided, affect or invalidate any such other agreement.
(d) The liability of each Borrower for the Line of Credit and the Converted
Term Loan shall be reinstated and revived and the rights of Bank shall continue
if and to the extent that for any reason any amount at any time paid on account
of the Line of Credit or the Converted Term Loan is rescinded or must otherwise
be restored by Bank, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, all as though such amount had not been paid.
(e) Each Borrower authorizes Bank, without notice to or demand on such
Borrower, and without affecting such Borrower's liability for the Line of Credit
and the Converted Term Loan, from time to time to: (a) alter, compromise,
extend, accelerate or otherwise change the time for payment of, or otherwise
change the terms of, the liabilities and obligations of the other Borrower to
Bank on account of the Line of Credit or the Converted Term Loan; (b) take and
hold security from the other Borrower for the payment of the Line of Credit or
the Converted Term Loan, and exchange, enforce, waive, subordinate or release
any such security; (c) apply such security and direct the order or manner of
sale thereof, including without limitation, a
--20--
non-judicial sale permitted by the terms of the controlling security agreement
or deed of trust, as Bank in its discretion may determine; (d) release or
substitute any one or more of the endorsers or any guarantors of the Line of
Credit or the Converted Term Loan, or any other party obligated thereon; and (e)
apply payments received by Bank from any other Borrower to indebtedness of such
other Borrower to Bank other than the Line of Credit or the Converted Term Loan.
(f) Each Borrower represents and warrants to Bank that it has established
adequate means of obtaining from the other Borrowers on a continuing basis
financial and other information pertaining to the other Borrowers' financial
condition, and each Borrower agrees to keep adequately informed from such means
of any facts, events or circumstances which might in any way affect its risks
hereunder. Each Borrower further agrees that Bank shall have no obligation to
disclose to it any information or material about the other Borrowers which is
acquired by Bank in any manner.
(g) Each Borrower waives any right to require Bank to: (i) proceed against
any other Borrower or any other Person; (ii) proceed against or exhaust any
security held from any other Borrower or any other Person; (iii) pursue any
other remedy in Bank's power; (iv) apply payments received by Bank from any
other Borrower to the Line of Credit or the Converted Term Loan; or (v) make any
presentments or demands for performance, or give any notices of nonperformance,
protests, notices of protest or notices of dishonor in connection with the Line
of Credit or the Converted Term Loan.
(h) Each Borrower waives any defense to its liability for the Line of
Credit or the Converted Term Loan based upon or arising by reason of: (i) any
disability or other defense of any other Borrower or any other Person; (ii) the
cessation or limitation from any cause whatsoever, other than payment in full,
of the liability of any other Borrower for the Line of Credit or the Converted
Term Loan; (iii) any lack of authority of any officer, director, partner, agent
or other Person acting or purporting to act on behalf of any other Borrower or
any defect in the formation of any other Borrower; (iv) the application by any
other Borrower of the proceeds of the Line of Credit for purposes other than the
purposes intended or understood by Bank or any Borrower; (v) any act or omission
by Bank which directly or indirectly results in or aids the discharge of any
other Borrower by operation of law or otherwise, or which in any way impairs or
suspends any rights or remedies of Bank against any other Borrower; (vi) any
impairment of the value of any interest in any security for the Line of Credit
or the Converted Term Loan, including without limitation, the failure to obtain
or maintain perfection or recordation of any interest in any such security, the
release of any such security without substitution,
--21--
and/or the failure to preserve the value of, or to comply with applicable law in
disposing of, any such security; or (vii) any modification of the obligations or
liabilities of any other Borrower for the Line of Credit, including without
limitation the renewal, extension, acceleration or other change in time for
payment of, or other change in the terms of, the indebtedness of any other
Borrower for the Line of Credit or the Converted Term Loan, including increase
or decrease of the rate of interest thereon. Until the Line of Credit, the
Converted Term Loan and all other indebtedness of each Borrower to Bank arising
under or in connection with this Agreement shall have been paid in full, no
Borrower shall have any right of subrogation. Each Borrower waives all rights
and defenses it may have arising out of (A) any election of remedies by Bank,
even though that election of remedies, such as a non-judicial foreclosure with
respect to any security for the Line of Credit or the Converted Term Loan,
destroys its rights of subrogation or its rights to proceed against any other
Borrower for reimbursement, or (B) any loss of rights it may suffer by reason of
any rights, powers or remedies of any other Borrower in connection with any
anti-deficiency laws or any other laws limiting, qualifying or discharging any
Borrower's indebtedness for the Line of Credit, whether by operation of Sections
726 or 580d of the Code of Civil Procedure as from time to time amended, or
otherwise. Until the Line of Credit, the Converted Term Loan and all other
indebtedness of each Borrower to Bank arising under or in connection with this
Agreement shall have been paid in full, each Borrower waives any right to
enforce any remedy which Bank now has or may hereafter have against any other
Borrower or any other Person who may in the future become a guarantor, co-
obligor, surety, third-party pledgor or provider of other security for any
portion of indebtedness hereunder, and waives any benefit of, or any right to
participate in, any security now or hereafter held by Bank.
(i) If any of the waivers herein is determined to be contrary to any
applicable law or public policy, such waiver shall be effective only to the
extent permitted by law.
(j) It is the position of the Borrowers that each Borrower benefits from
the Line of Credit that has been made available by Bank under this Agreement and
from each extension of credit thereunder, regardless of whether such credit is
disbursed to a joint account of Borrowers or to or for the account of any
Borrower.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
--22--
XXXXX FARGO BANK,
SEATTLE FILMWORKS, INC. NATIONAL ASSOCIATION
By: /s/ Case X. Xxxxx By: /s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
Title: Vice President Vice President
OPTICOLOR, INC.
By: /s/ Xxxxxx Xxxx
Title: President
SEATTLE FILMWORKS MANUFACTURING COMPANY, INC.
By: /s/ Xxxx X. Xxxxxxxxxxxxxx
Title: President
--23--
EXHIBIT 10.1
REVOLVING LINE OF CREDIT NOTE
$6,000,000.00 Seattle, Washington
March 1, 1997
FOR VALUE RECEIVED, the undersigned SEATTLE FILMWORKS, INC., OPTICOLOR,
INC., and SEATTLE FILMWORKS MANUFACTURING COMPANY (collectively, "Borrowers,"
individually a "Borrower"), promise to pay to the order of XXXXX FARGO BANK,
NATIONAL ASSOCIATION ("Bank") at its office at Puget Sound RCBO, 999 Third
Avenue, 11th Floor, Seattle, Washington, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of Six Million Dollars
($6,000,000.00), or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in Washington are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2) or three (3) months, as designated by any
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however, that
no Fixed Rate Term may be selected for a principal amount less than Five Hundred
Thousand Dollars ($500,000.00); and provided further, that no Fixed Rate Term
shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term
would end on a day which is not a Business Day, then such Fixed Rate Term shall
be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for
the purpose of calculating effective rates of interest for loans making
reference thereto, on the first day of a Fixed Rate Term for delivery of funds
on said date for a period of time approximately equal to the number of days in
such Fixed Rate Term and in an amount approximately equal to the principal
amount to which such Fixed Rate Term applies. Each Borrower understands and
agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate
upon such offers or other market indicators of the Inter-Bank Market as Bank in
its discretion deems appropriate including, but not limited to, the rate offered
for U.S. dollar deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
--------
interest (computed on the basis of a 365-day year, actual days elapsed) either
(i) at a fluctuating rate per annum equal to the Prime Rate in effect from time
to time, or (ii) at a fixed rate per annum determined by Bank to be three
quarters of a percent (.75%) above LIBOR in effect on the first day of the
applicable Fixed Rate Term. When interest is determined in relation to the
Prime Rate, each change in the rate of interest hereunder shall become effective
on the date each Prime Rate change is announced within Bank. With respect to
each LIBOR selection hereunder, Bank is hereby authorized to note the date,
principal amount, interest rate and Fixed Rate Term applicable thereto and any
payments made thereon on Bank's books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion of this
----------------------------------
Note bears interest determined in relation to LIBOR, it may be continued by any
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate
-2-
or to LIBOR for a new Fixed Rate Term designated by any Borrower. At any time
any portion of this Note bears interest determined in relation to the Prime
Rate, any Borrower may convert all or a portion thereof so that it bears
interest determined in relation to LIBOR for a Fixed Rate Term designated by any
Borrower. At such time as any Borrower requests an advance hereunder or wishes
to select a LIBOR option for all or a portion of the outstanding principal
balance hereof, and at the end of each Fixed Rate Term, the applicable Borrower
shall give Bank notice specifying: (i) the interest rate option selected by the
Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR
selection, the length of the applicable Fixed Rate Term. Any such notice may be
given by telephone so long as, with respect to each LIBOR selection, (A) Bank
receives written confirmation from not later than three (3) Business Days after
such telephone notice is given, and (B) such notice is given to Bank prior to
10:00 a.m., California time, on the first day of the Fixed Rate Term. For each
LIBOR option requested hereunder, Bank will quote the applicable fixed rate to
the applicable Borrower at approximately 10:00 a.m., California time, on the
first day of the Fixed Rate Term. If the applicable Borrower does not
immediately accept the rate quoted by Bank, any subsequent acceptance by the
applicable Borrower shall be subject to a redetermination by Bank of the
applicable fixed rate; provided however, that if the applicable Borrower fails
to accept any such rate by 11:00 a.m., California time, on the Business Day such
quotation is given, then the quoted rate shall expire and Bank shall have no
obligation to permit a LIBOR option to be selected on such day. If no specific
designation of interest is made at the time any advance is requested hereunder
or at the end of any Fixed Rate Term, the applicable Borrower shall be deemed to
have made a Prime Rate interest selection for such advance or the principal
amount to which such Fixed Rate Term applied.
(c) Additional LIBOR Provisions.
----------------------------
(i) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining LIBOR, then Bank shall promptly
give notice thereof to the applicable Borrower. If such notice is given and
until such notice has been withdrawn by Bank, then (A) no new LIBOR option may
be selected by any Borrower, and (B) any portion of the outstanding principal
balance hereof which bears interest determined in relation to LIBOR, subsequent
to the end of the Fixed Rate Term applicable thereto, shall bear interest
determined in relation to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest rates
based on
-3-
LIBOR, then in the former event, any obligation of Bank to make available such
unlawful LIBOR options shall immediately be canceled, and in the latter event,
any such unlawful LIBOR-based interest rates then outstanding shall be
converted, at Bank's option, so that interest on the portion of the outstanding
principal balance subject thereto is determined in relation to the Prime Rate;
provided however, that if any such Change in Law shall permit any LIBOR-based
interest rates to remain in effect until the expiration of the Fixed Rate Term
applicable thereto, then such permitted LIBOR-based interest rates shall
continue in effect until the expiration of such Fixed Rate Term. Upon the
occurrence of any of the foregoing events, Borrowers shall pay to Bank
immediately upon demand such amounts as may be necessary to compensate Bank for
any fines, fees, charges, penalties or other costs incurred or payable by Bank
as a result thereof and which are attributable to any LIBOR options made
available to Borrowers hereunder, and any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrowers.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank of
principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrowers shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrowers hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrowers.
(d) Payment of Interest. Interest accrued on this Note on
-------------------
-4-
any portion of the outstanding principal balance of this Note that bears
interest determined in relation to the Prime Rate shall be payable on the last
day of each month, commencing March 31, 1997, and at the earliest of (i)
repayment of the applicable borrowing, or (ii) the conversion of the borrowing
to a LIBOR borrowing hereunder. Interest accrued on this Note on any portion of
the outstanding principal balance of this Note that bears interest determined in
relation to LIBOR shall be payable on the last day of the relevant Fixed Rate
Term. Notwithstanding anything contained herein to the contrary, all accrued and
unpaid interest under this Note shall be fully due and payable on the maturity
date of this Note.
(e) Default Interest. From and after the maturity date of this Note, or
----------------
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrowers may from time to time during the
-----------------------
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. The outstanding principal balance of this Note shall be due and
payable in full on March 31, 1998.
(b) Advances. Advances hereunder, to the total amount of the principal sum
--------
stated above, may be made by the holder at the oral or written request of (i)
Xxxx X. Xxxxxxxxxxxxxx or Case X. Xxxxx or Xxxxx Xxxxxxxx Bond, any one acting
alone, who are authorized to request advances and direct the disposition of any
advances until written notice of the revocation of such authority is received by
the holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any account of any Borrower with the holder,
which advances, when so deposited, shall be conclusively presumed to have been
made to or for the benefit of each Borrower regardless of the fact that persons
other than those authorized to request advances may have authority to draw
against such account. The holder shall have no obligation to determine whether
any person requesting an advance
-5-
is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this Note shall be
-----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
PREPAYMENT:
(a) Prime Rate. Borrowers may prepay principal on any portion of this Note
----------
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
(b) LIBOR. Borrowers may prepay principal on any portion of this Note
-----
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrowers, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrowers shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each month
---------
on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the Fixed Rate Term
applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
--------
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at LIBOR in
effect on the date of prepayment for new loans made for such term and
in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may
-6-
result in Bank incurring additional costs, expenses and/or liabilities, and that
it is difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrowers fail to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum four percent (4%) above
the Prime Rate in effect from time to time (computed on the basis of a 365-day
year, actual days elapsed). Each change in the rate of interest on any such past
due prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of that certain Credit Agreement between Borrowers and Bank dated as of March 1,
1997, as amended from time to time (the "Credit Agreement"). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an "Event of Default"
under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of
--------
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), expended
or incurred by the holder in connection with the enforcement of the holder's
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in any way related to
this Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one
-----------------------------
-7-
person or entity sign this Note as a Borrower, the obligations of each such
Borrower shall be joint and several, as further provided in the Credit
Agreement.
(c) Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of Washington.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
SEATTLE FILMWORKS, INC.
By: /s/ Case X. Xxxxx
Title: Vice President Finance
OPTICOLOR, INC.
By: /s/ Xxxxxx Xxxx
Title: President
SEATTLE FILMWORKS MANUFACTURING COMPANY
By: Xxxx X. Xxxxxxxxxxxxxx
Title: President
-8-
EXHIBIT 10.1
EXHIBIT B
CONVERTED TERM NOTE
$ Seattle, Washington
-- March 31, 1998
FOR VALUE RECEIVED, the undersigned, SEATTLE FILMWORKS, INC., OPTICOLOR,
INC., and SEATTLE FILMWORKS MANUFACTURING COMPANY (collectively, "Borrowers,"
individually a "Borrower"), promise to pay to the order of XXXXX FARGO BANK,
NATIONAL ASSOCIATION ("Bank") at its office at Puget Sound RCBO, 999 Third
Avenue, 11th Floor, Seattle, Washington, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of
________________________________________________________________________ Dollars
($_______________), with interest thereon as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Washington are authorized or required by law to
close.
(b) "LIBOR Fixed Rate Term" means a period commencing on a Business Day
and continuing for one (1), two (2), or three (3) months, as designated by any
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however, that
no LIBOR Fixed Rate Term may be selected for a principal amount less than Five
Hundred Thousand Dollars ($500,000.00); and provided further, that no LIBOR
Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any
LIBOR Fixed Rate Term would end on a day which is not a Business Day, then such
LIBOR Fixed Rate Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a LIBOR Fixed Rate Term for delivery of funds on said date for a period of
time approximately equal to the number of days in such LIBOR Fixed Rate Term and
in an amount approximately equal to the principal amount to which such LIBOR
Fixed Rate Term applies. Each Borrower understands and agrees that Bank may base
its quotation of the Inter-Bank Market Offered Rate upon such offers or other
market indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S. dollar
deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable LIBOR Fixed Rate Term.
(d) "Money Market Fixed Rate Term" means a period commencing on a Business
Day and continuing for not less than one (1) day nor more than ninety (90) days,
as designated by any Borrower, during which all or a portion of the outstanding
principal balance of this Note bears interest determined in relation to the
Money Market Funds Rate; provided however, that no Money Market Fixed Rate Term
may be selected for a principal amount less than Five Hundred Thousand Dollars
($500,000.00); and provided further, that no Money Market Fixed Rate Term shall
extend beyond the scheduled maturity date hereof. If any Money Market Fixed
Rate Term would end on a day which is not a Business Day, then such Money Market
Fixed Rate Term shall be extended to the next succeeding Business Day.
(e) "Money Market Funds Rate" means the rate per annum which Bank
estimates and quotes to its borrowers as the rate, adjusted for reserve
requirements, federal deposit insurance and any other amount which Bank deems
appropriate, at which funds in the amount of a loan and for a period of time
comparable to the term of such loan are available for purchase in the money
market on the date such loan is made, with the understanding that the Money
Market Funds Rate is Bank's estimate only and that Bank is under no obligation
to actually purchase and/or match funds for any transaction. This rate is not
fixed by or related in any way to any rate that Bank quotes or pays for deposits
accepted through its branch system.
(f) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one
-2-
of Bank's base rates and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto, and is
evidenced by the recording thereof after its announcement in such internal
publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
--------
interest (computed on the basis of a 365-day year, actual days elapsed) either
(i) at a fluctuating rate equal to the Prime Rate in effect from time to time,
(ii) at a fixed rate per annum determined by Bank to be three quarters of a
percent (.75%) above LIBOR in effect on the first day of the applicable LIBOR
Fixed Rate Term, or (iii) at a fixed rate per annum determined by Bank to be
one-half of a percent (.50%) above the Money Market Funds Rate in effect on the
first day of the applicable Money Market Fixed Rate Term. When interest is
determined in relation to the Prime Rate, each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is announced
within Bank. With respect to each LIBOR and Money Market Funds Rate selection
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and LIBOR Fixed Rate Term or Money Market Fixed Rate Term
applicable thereto and any payments made thereon on Bank's books and records
(either manually or by electronic entry) and/or on any schedule attached to this
Note, which notations shall be prima facie evidence of the accuracy of the
information noted.
(b) Selection of Interest Rate Options. At any time any portion of this
----------------------------------
Note bears interest determined in relation to LIBOR, it may be continued by the
applicable Borrower at the end the LIBOR Fixed Rate Term applicable thereto so
that all or a portion thereof bears interest determined in relation to the Prime
Rate, to LIBOR for a new LIBOR Fixed Rate Term designated by the applicable
Borrower, or to the Money Market Funds Rate for a new Money Market Fixed Rate
Term designated by the applicable Borrower. At any time any portion of this
Note bears interest determined in relation to the Prime Rate, the applicable
Borrower may convert all or a portion thereof so that it bears interest
determined in relation to LIBOR for a LIBOR Fixed Rate Term designated by the
applicable Borrower or to the Money Market Funds Rate for a Money Market Fixed
Rate Term designated by the applicable Borrower. At the time the balance of the
Line of Credit Note (as such term is defined in the Credit Agreement (as defined
below)) is converted into this Note or any Borrower wishes to select a LIBOR or
Money Market Fund Rate option for all or a portion of the outstanding principal
balance hereof, and at the end of each LIBOR Fixed Rate Term and each Money
Market Fixed Rate Term, the applicable Borrower shall give Bank notice
specifying: (i) the interest rate option selected by the Borrower; (ii) the
principal amount subject thereto; and (iii)
-3-
for each LIBOR selection, the length of the applicable LIBOR Fixed Rate Term,
and for each Money Market Funds Rate selection, the length of the applicable
Money Market Fixed Rate Term. Any such notice may be given by telephone so long
as, (A) with respect to each LIBOR selection, (1) Bank receives written
confirmation from the Borrower not later than three (3) Business Days after such
telephone notice is given, and (2) such notice is given to Bank prior to 10:00
a.m., California time, on the first day of the LIBOR Fixed Rate Term, and (B)
with respect to each Money Market Funds Rate selection, Bank receives written
confirmation from the Borrower not later than three (3) Business Days after such
telephone notice is given. For each LIBOR option requested hereunder, Bank will
quote the applicable fixed rate to the applicable Borrower at approximately
10:00 a.m., California time, on the first day of the LIBOR Fixed Rate Term. If
the Borrower does not immediately accept the rate quoted by Bank, any subsequent
acceptance by the Borrower shall be subject to a redetermination by Bank of the
applicable fixed rate; provided however, that if the Borrower fails to accept
any such rate by 11:00 a.m., California time, on the Business Day such quotation
is given, then the quoted rate shall expire and Bank shall have no obligation to
permit a LIBOR option to be selected on such day. If no specific designation of
interest is made at the time the balance of the Line of Credit Note is converted
into this Note or at the end of any LIBOR Fixed Rate Term or Money Market Fixed
Rate Term, Borrowers shall be deemed to have made a Prime Rate interest
selection for this Note or the principal amount to which such LIBOR Fixed Rate
Term or Money Market Fixed Rate Term applied.
(c) Additional LIBOR Provisions.
----------------------------
(i) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining LIBOR, then Bank shall promptly
give notice thereof to the applicable Borrower. If such notice is given and
until such notice has been withdrawn by Bank, then (A) no new LIBOR option may
be selected by any Borrower, and (B) any portion of the outstanding principal
balance hereof which bears interest determined in relation to LIBOR, subsequent
to the end of the LIBOR Fixed Rate Term applicable thereto, shall bear interest
determined in relation to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest rates
based on LIBOR, then in the former event, any obligation of Bank to make
available such unlawful LIBOR options shall immediately be canceled, and in the
latter event, any such unlawful LIBOR-based interest rates then outstanding
shall be converted, at Bank's
-4-
option, so that interest on the portion of the outstanding principal balance
subject thereto is determined in relation to the Prime Rate; provided however,
that if any such Change in Law shall permit any LIBOR-based interest rates to
remain in effect until the expiration of the LIBOR Fixed Rate Term applicable
thereto, then such permitted LIBOR-based interest rates shall continue in effect
until the expiration of such LIBOR Fixed Rate Term. Upon the occurrence of any
of the foregoing events, Borrowers shall pay to Bank immediately upon demand
such amounts as may be necessary to compensate Bank for any fines, fees,
charges, penalties or other costs incurred or payable by Bank as a result
thereof and which are attributable to any LIBOR options made available to
Borrowers hereunder, and any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrowers.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank
of principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of Bank;
or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrowers shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrowers hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrowers.
(d) Payment of Interest. Interest accrued on this Note on any portion of
-------------------
the outstanding principal balance of this Note that bears interest determined in
relation to the Prime Rate shall be payable (i) on the last day of each month,
commencing
-5-
April 30, 1998, (ii) on the date of each repayment hereunder, and (iii) on the
date of each conversion of any portion of this Note to a LIBOR or Money Market
Funds Rate borrowing hereunder. Interest accrued on this Note on any portion of
the outstanding principal balance of this Note that bears interest determined in
relation to LIBOR or the Money Market Funds Rate shall be payable on the last
day of the relevant LIBOR Fixed Rate Term or Money Market Fixed Rate Term, as
applicable. Notwithstanding anything contained herein to the contrary, all
accrued and unpaid interest under this Note shall be fully due and payable on
the maturity date of this Note.
(e) Default Interest. From and after the maturity date of this Note, or
----------------
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.
REPAYMENT AND PREPAYMENT:
(a) Repayment. Borrowers shall make principal reductions on this Note in
---------
an amount equal to at least one-fifth (1/5) of the initial principal balance of
this Note in each calendar year from the date of this Note until the maturity
date of this note, including partial calendar years, with a final installment
consisting of all remaining unpaid principal due and payable in full on March
31, 2003. Beginning on June 30, 1998, Borrowers shall make a quarterly
principal payment equal to the following percentages of the annual required
principal payment (which will be based on a full amortization over the term of
this Note of the initial principal balance of this Note):
% of Required
Payment Due Annual Reduction
----------- ----------------
March 31 0%
June 30 25%
September 30 50%
December 31 25%
(b) Application of Payments. Each payment made on this Note shall be
-----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest LIBOR Fixed Rate Term first, and
third, to the
-6-
outstanding principal balance of this Note which bears interest determined in
relation to the Money Market Funds Rate, with such payments applied to the
oldest Money Market Fixed Rate Term first.
(c) Prepayment.
-----------
Prime Rate. Borrowers may prepay principal on any portion of this Note
----------
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
LIBOR. Borrowers may prepay principal on any portion of this Note which
-----
bears interest determined in relation to LIBOR or the Money Market Funds Rate at
any time and in the minimum amount of Five Hundred Thousand Dollars
($500,000.00); provided however, that if the outstanding principal balance of
such portion of this Note is less than said amount, the minimum prepayment
amount shall be the entire outstanding principal balance thereof. In
consideration of Bank providing this prepayment option to Borrowers, or if any
such portion of this Note shall become due and payable at any time prior to the
last day of the LIBOR Fixed Rate Term or Money Market Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrowers shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such LIBOR
Fixed Rate Term or Money Market Fixed Rate Term matures, calculated as follows
for each such month:
(i) Determine the amount of interest which would have accrued each month
---------
on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the LIBOR Fixed
Rate Term or Money Market Fixed Rate Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
--------
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such LIBOR Fixed Rate Term at
LIBOR, or such Money Market Fixed Rate Term at the Money Market Funds
Rate, as applicable, in effect on the date of prepayment for new
loans made for such term and in a principal amount equal to the
amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR or the Money Market Funds Rate used
in (ii) above, as applicable.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full
-7-
extent of such costs, expenses and/or liabilities. Each Borrower, therefore,
agrees to pay the above-described prepayment fee and agrees that said amount
represents a reasonable estimate of the prepayment costs, expenses and/or
liabilities of Bank. If any Borrower fails to pay any prepayment fee when due,
the amount of such prepayment fee shall thereafter bear interest until paid at a
rate per annum four percent (4%) above the Prime Rate in effect from time to
time (computed on the basis of a 365-day year, actual days elapsed).
All prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrowers and Bank dated as of March 1,
1997, as amended from time to time (the "Credit Agreement"). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an "Event of Default"
under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of
--------
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower. Each
Borrower shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys'
fees (to include outside counsel fees and all allocated costs of the holder's
in-house counsel), expended or incurred by the holder in connection with the
enforcement of the holder's rights and/or the collection of any amounts which
become due to the holder under this Note, and the prosecution or defense of any
action in any way related to this Note, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or entity
-----------------------------
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several, as further provided in the Credit Agreement.
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(c) Governing Law. This Note shall be governed by and construed in
--------------
accordance with the laws of the State of Washington.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
SEATTLE FILMWORKS, INC.
By: /s/ Case X. Xxxxx
Title: Vice President Finance
OPTICOLOR, INC.
By: /s/ Xxxxxx Xxxx
Title: President
SEATTLE FILMWORKS MANUFACTURING COMPANY
By: /s/ Xxxx X. Xxxxxxxxxxxxxx
Title: President
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