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EXHIBIT 10.7
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and
entered into as of January 17, 1997 by and between REMEC, Inc., a California
corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A. ("Bank"). This
Agreement amends and restates in its entirety that certain loan agreement dated
June 17, 1993 between Bank and Borrower, as amended.
SECTION 1. THE LOAN
1.1.1 THE REVOLVING L0AN. Bank will loan to Borrower an
amount not to exceed Nine Million Dollars ($9,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in amounts of not less than One
Thousand Dollars ($1,000) in accordance with the terms of the Revolving Note.
All borrowings of the Revolving Loan must be made before July 1, 1998 at which
time all unpaid principal and interest of the Revolving Loan shall be due and
payable. The Revolving Loan shall be evidenced by a promissory note (the
"Revolving Note") on the standard form used by Bank for commercial loans. Bank
shall enter each amount borrowed and repaid in Bank's records and such entries
shall be deemed to be the amount of the Revolving Loan outstanding. Omission of
Bank to make any such entries shall not discharge Borrower of its obligation to
repay in full with interest all amounts borrowed.
1.1.1.1 THE STANDBY L/C SUBLIMIT. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable standby letters of credit (individually, an "L/C" and collectively,
the "L/Cs"). All such L/Cs shall be drawn on such terms and conditions as are
acceptable to Bank. The aggregate amount available to be drawn under all
outstanding L/Cs and the aggregate amount of unpaid reimbursement obligations
under drawn L/Cs shall not exceed Five Hundred Thousand Dollars ($500,000) and
shall reduce, dollar for dollar, the maximum amount available under the
Revolving Loan. No L/C shall have an expiry date more than twelve months from
its date of issuance and each L/C shall be governed by the terms of (and
Borrower agrees to execute) Bank's standard form of standby letter of credit
application and reimbursement agreement. No L/C shall expire after July 1, 1998.
1.1.2 THE REVOLVER-TO-TERM LOAN. Bank will loan to
Borrower an amount not to exceed Eight Million Dollars ($8,000,000) outstanding
in the aggregate at any one time (the "Revolver-To-Term Loan"). Borrower may
borrow, repay and reborrow all or part of the Revolver-To-Term in amounts of not
less than One Hundred Thousand Dollars ($100,000) in accordance with the terms
of the Revolver-To-Term Note. All borrowings of the Revolver-To-Term Loan must
be made before July 1, 1998, at which time all unpaid principal under the
Revolver-To-Term Loan shall be converted to a fully amortizing term loan as set
forth in Section 1.1.3. The Revolver-To-Term Loan shall be evidenced by a
promissory note (the "Revolver-To-Term Note") on the standard form used by Bank
for commercial loans. Bank shall enter each amount borrowed and repaid in Bank's
records and such entries shall be deemed to be the amount of the
Revolver-To-Term Loan outstanding. Omission of Bank to make any such entries
shall not discharge Borrower of its obligation to repay in full with interest
all amounts borrowed.
1.1.3 THE TERM LOAN. Solely to repay the
Revolver-To-Term Loan, Bank will loan to Borrower the sum outstanding at the
maturity of the Revolver-To-Term Loan in one disbursement on or before July 1,
1998 (the "Term Loan"). In the event of a prepayment of principal and payment of
any resulting fees, any prepaid amounts shall be applied to the scheduled
principal payments in the reverse order of their maturity. The Term Loan shall
be evidenced by a promissory note (the "Term Note") on the standard form used by
Bank for commercial loans.
1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively, all
the credit facilities described above.
As used herein the word "Note" shall mean, collectively, all
the promissory notes described above and all reimbursement agreements entered
into with respect to L/Cs.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
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1.3 BORROWING BASE. Borrower will not be subject to a
borrowing base so long as the principal amount of the Revolving Loan does not
exceed Five Million Dollars ($5,000,000). Notwithstanding any other provision
of this Agreement, Bank shall not be obligated to advance funds under the
Revolving Loan in a principal amount in excess of Five Million Dollars
($5,000,000) if the outstanding amount of Borrower's obligations to Bank under
the Revolving Loan exceeds, or after giving effect to the requested advance
would exceed, the sum of (a) eighty percent (80%)of the combined Eligible
Accounts of Borrower, Remec Wireless, Inc., Xxxxxxxx, Inc., RF Microsystems,
Inc., Magnum Microwave Corporation and Radian Technology, Inc. (Remec Wireless,
Inc., Xxxxxxxx, Inc., RF Microsystems, Inc., Magnum Microwave Corporation and
Radian Technology, Inc.) being hereinafter referred to individually as a
"Pledgor" and collectively as the "Pledgors"), and (b) twenty-five percent (25%)
of the combined Eligible Inventory of Borrower and all Pledgors; provided,
however, that loan availability based upon Eligible Inventory shall not exceed
Seven Hundred Fifty Thousand Dollars ($750,000) unless (x) Bank shall have
completed, or shall have caused to be completed, an inventory appraisal the
results of which are satisfactory to Bank in its sole reasonable discretion,
and (y) Bank shall have specifically approved such excess advance; and, provided
further, that loan availability based upon Eligible Inventory shall in no event
exceed One Million Five Hundred Thousand Dollars ($1,500,000). If at any time
Borrower's obligations to Bank under the above facilities exceed the sum so
permitted, Borrower shall immediately repay to Bank such excess.
1.3.1 ELIGIBLE ACCOUNTS. The term "Accounts" means all
presently existing and hereafter arising accounts receivable, contract rights,
chattel paper, and all other forms of obligations owing to Borrower or any
Pledgor, payable in United States Dollars, arising out of the sale or lease of
goods, or the retention of services by Borrower or a Pledgor, as the case may
be, whether or not earned by performance, and any and all credit insurance,
guaranties and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower or a Pledgor, as the case may be, and Borrower's and
each Pledgor's books and records relating to any of the foregoing.
The term "Eligible Accounts" means those Accounts, net of finance
charges, which are due and payable within ninety (90) days, or less, from the
date of the invoice, have been validly assigned to Bank and strictly comply
with all of Borrower's or the relevant Pledgor's, as the case may be,
warranties and representations to Bank, but Eligible Accounts shall not include
the following:
(a) Any Account with respect to which the account
debtor is an officer, shareholder, director, employee or agent of Borrower or a
Pledgor;
(b) Any Account with respect to which the account
debtor is a subsidiary of, related to, or affiliated or has common officers or
directors with Borrower or a Pledgor;
(c) Any Account relating to goods placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional;
(d) That portion of the Accounts owed by account
debtors that are not residents of the United States or Canada ("Foreign
Account Debtors") which exceeds twenty-five percent (25%) of all Accounts owed
by Foreign Account Debtors; provided, however, that any Account owed by a
Foreign Account Debtor which is insured by FCIA or supported by a letter of
credit, and all Accounts owed by GEC-Marconi Ltd. or British Aerospace PLC
(whether or not the same are insured by FCIA or supported by a letter of
credit) shall be deemed not to be Accounts owed by Foreign Account Debtors for
purposes of this clause (d), and shall not be subject to the foregoing
limitation;
(e) Any Account with respect to which the account
debtor is the United States or any department, agency or instrumentality of the
United states;
(f) Any Account with respect to which Borrower or a
Pledgor, as the case may be, is or may become liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower or such
Pledgor provided, however, that the exclusion of any accounts shall be limited
to the amount of Borrower's or Pledgor's liabilities to the account debtor, as
the case may be;
(g) Any Account with respect to which there is
asserted a defense, counterclaim, discount or set off, whether well-founded or
otherwise, except for those discounts, allowances and returns arising in the
ordinary course of Borrower's or the relevant Pledgor's, as the case may be,
business;
(h) Any Account with respect to which the account
debtor becomes insolvent, fails to pay its debts as they mature or goes out of
business or that is owed by an account debtor which has become the subject of a
proceeding under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including, but not
limited to, assignments for the benefit of creditors, formal or informal
moratoriums, compositions or extensions with all or substantially all of its
creditors;
(i) Any Account owed by any account debtor with
respect to which twenty percent (20%) or more of the aggregate dollar amount
of its Accounts are not paid within ninety (90) days from the due date of the
invoice;
(j) Any Account that is not paid by the account
debtor within ninety (90) days of the invoice date;
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(k) Any Account that is not paid by the account debtor and for which
a credit memo has been issued which is over 90 days old;
(l) That portion of the Accounts owned by any single account debtor
which exceeds twenty-five percent (25%) of all of the Accounts; and
(m) Any Account which Bank deems not to be an Eligible Account.
1.3.2 ELIGIBLE INVENTORY. The term "Eligible Inventory" means that
portion of Borrower's or a Pledgor's inventory of general use raw materials
which is (a) owned by Borrower or a Pledgor free and clear of all liens or
encumbrances except those in favor of Bank, (b) held for sale or lease by
Borrower or a Pledgor and normally and currently saleable in the ordinary course
of Borrower's or such Pledgor's business, (c) of good and merchantable quality,
free from defects, (d) located only at locations of which Bank is notified in
writing, and (e) the subject of a perfected first priority security interest in
favor of Bank. Eligible Inventory does not include any of the following:
finished goods, raw materials which are not generally usable in Borrower's or
the relevant Pledgor's, as the case may be, business, work in process, spare
parts, returned items, damaged, defective or recalled items, items unfit for
further processing, obsolete or unmerchantable items, items used as
salesperson's samples or demonstrators, inventory held in stock more than twelve
(12) months, or inventory which Bank otherwise deems not be Eligible Inventory.
The term "inventory" means and includes all of Borrower's and each
Pledgor's present and future goods and other personal property which are held
for sale or lease or are to be furnished under a contract of service, wherever
located, including those held for display or demonstration or out on lease or
consignment, all raw materials, work in process, finished goods, packing and
shipping materials and other materials used or consumed, or to be used or
consumed, in Borrower's or a Pledgor's, as the case may be, business, and all
documents of title representing any of the above.
1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be used
only for general working capital purposes, and the proceeds of the
Revolver-To-Term Loan shall be used only for general business purposes,
including the purchase of fixed assets or the acquisition of other businesses.
The proceeds of the Term Loan shall be used only for the purpose specified in
Section 1.1.3.
1.5 INTEREST. The unpaid principal balance of the Revolving Loan, the
Revolver-to-Term Loan and the Term Loan shall bear interest at the rates
provided in the Revolving Note, the Revolver-to-Term Note and the Term Note,
respectively, and selected by Borrower. Such loans may be prepaid in full or in
part only in accordance with the terms of such notes and any such prepayment
shall be subject to the prepayment fee provided for therein.
1.6 UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee on the
unutilized portions of the Revolving Loan and the Revolver-to-Term Loan
("Non-utilization Fee") calculated and payable annually in arrears, based on
the combined unutilized amount of such loans, at a rate of 9 basis points per
annum, not to exceed $15,000 per annum. The Non-Utilization Fee shall be
reduced by a credit calculated at the rate of 50 basis points per annum on the
average combined outstanding balance of the Revolving Loan and the
Revolver-To-Term Loan maintained by Borrower. The amount of fee credits not
used to off-set the Non-utilization Fee during the first twelve month period
shall be carried over to the subsequent period of determination.
1.7 L/C FEES. All fees in connection with L/Cs shall be in accordance
with Bank's standard schedule of fees as published from time to time, except
that the issuance/maintenance fee for each L/C shall be one percent (1%) per
annum (minimum $150), payable annually in advance on the date such L/C is
issued and on each anniversary of such date.
1.8 BALANCES. Borrower shall maintain its major depository accounts with
Bank until the Note and all sums payable pursuant to this Agreement have been
paid in full.
1.9 DISBURSEMENT. Following execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.10 SECURITY. Prior to any disbursement of the Loan, Borrower and each
Pledgor shall have executed security agreements on Bank's standard form, and
financing statements suitable for filing in the office of the Secretary of
State of the State of California and any other state designated by Bank,
granting to Bank a first priority security interest in such of Borrower's or
the relevant Pledgor's, as the case may be, property as is described in said
security agreements. Exceptions to Bank's first priority, if any, are permitted
only as otherwise provided in this Agreement.
1.11 CONTROLLING DOCUMENT. In the event of any inconsistency between the
terms of this Agreement and any Note or any of the other Loan Documents, the
terms of such Note or other Loan Documents will prevail over the term of this
Agreement.
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SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such disbursement,
the following conditions have been fulfilled to Bank's satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with all
terms and conditions required by this Agreement to be performed or complied
with by it prior to or at the date of the making of such disbursement and shall
have executed and delivered to Bank the Note and other documents deemed
necessary by Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who are authorized to act on Borrower's behalf
in connection with this Agreement and to do the things required of Borrower
pursuant to this Agreement.
2.3 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default; nor
shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
manufacture of microwave electronics.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling
interest or at least a 25% ownership interest) and their addresses, and the
names of Borrower's principal shareholders, are as provided on a schedule
delivered to Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance of
this Agreement, the Note and all other agreements and instruments required by
Bank in connection with the Loan are not in contravention of any of the terms
of any indenture, agreement or undertaking to which Borrower is a party or by
which it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of Borrower,
including both a balance sheet at December 1, 1996, together with supporting
schedules, and an income statement for the ten (10) months ended December 1,
1996, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period covered
thereby. Since December 1, 1996, there has been no material adverse change in
the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in the
ordinary course of business, Borrower has good and marketable title to all of
the property reflected in its financial statements delivered to Bank and to all
property acquired by Borrower since the date of said financial statements, free
and clear of all liens, encumbrances, security interests and adverse claims
except those specifically referred to in said financial statements.
3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely
to affect the financial condition, property or business of Borrower in a
materially adverse manner or result in liability in excess of Borrower's
insurance coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of any of
its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute such an
event of default.
3.8 ORGANIZATION. Borrower is duly organized and existing under the
laws of the state of its organization, and has the power and authority to carry
on the business in which it is engaged and/or proposes to engage.
3.9 POWER. Borrower has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by this
Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good standing
in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with respect
to any applicable laws, rules, ordinances or regulations which materially
affect the operations or financial condition of Borrower.
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3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently planned by
Borrower, or any agent acting on its behalf, which would cause this Agreement
or the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used directly
or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement
of the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan only
as provided in Section 1.4, above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay an discharge promptly
all taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof, however, that Borrower
shall have the right in good faith to contest any such taxes, assessments,
charges or claims and, pending the outcome of such contest, to delay or refuse
payment thereof provided that adequately funded reserves are established by it
to pay and discharge any such taxes, assessments, charges and claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within forty-five (45) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, Borrower's and each
Pledgor's unaudited balance sheets as of the close of such fiscal quarter, and
unaudited income and expense statements with supportive schedules and statements
of retained earnings for such fiscal quarter, in each case prepared in
accordance with generally accepted accounting principles and accompanied by a
consolidating schedule;
(b) Within ninety (90) days after the close of each fiscal
year, a copy of Borrower's consolidated statement of financial condition
including at least its balance sheet as of the close of such fiscal year, and
its income and expense statement and retained earnings statement for such
fiscal year, examined and prepared on an audited basis by independent certified
public accountants selected by Borrower and reasonably satisfactory to Bank in
accordance with generally accepted accounting principles applied on a basis
consistent with that of previous years, accompanied by an unaudited
consolidating schedule;
(c) As soon as available, copies of such financial statements
and reports as Borrower may file with any state or federal agency, including
its 10-K and 10-Q reports;
(d) Such other financial statements and information as Bank may
reasonably request from time to time;
(e) In connection with each financial statement provided
hereunder, a statement executed by the president or chief financial officer of
Borrower certifying that no default has occurred and no event exists which with
notice of the lapse of time, or both, would result in a default hereunder;
(f) In connection with each fiscal year-end statement required
hereunder, any management letter of Borrower's certified public accountants;
(g) Within forty-five (45) days after each fiscal quarter, a
certification of compliance with all covenants under this Agreement, executed
by Borrower's chief financial officer or other duly authorized officer of
Borrower, in form acceptable to Bank;
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(h) Prompt written notice to Bank of all events of default under
any of the terms or provisions of this Agreement or of any other agreement,
contract, document or instrument entered or to be entered into with Bank, any
litigation in excess of One Million Dollars ($1,000,000) which, if decided
adversely to Borrower, would have a material adverse effect on Borrower's
financial condition, and any other matter which has resulted in, or is likely to
result in, a material adverse change in Borrower's financial condition or
operations:
(i) Prior to written notice to Bank of any changes in Borrower's
officers and other senior management, Borrower's name, and the location of
Borrower's and each Pledgor's assets, principal place of business or chief
executive office; and
(j) Within twenty (20) days after each calendar month end in
which the principal amount outstanding under the Revolving Loan in excess of
Five Million Dollars ($5,000,000),a copy of Borrower's and each Pledgor's
monthly accounts receivable aging and accounts payable aging and, when inventory
advances are outstanding, inventory summary report, together with a
certification of compliance with the Borrowing Base described above, executed
by Borrower's chief financial officer or other duly authorized officer of
Borrower, in form acceptable to Bank, which certificate shall accurately report
Borrower's and each Pledgor's accounts and Eligible Accounts and, when inventory
advances are outstanding, inventory and Eligible inventory. Borrower will permit
Bank to audit, at Borrower's expense, Bank's collateral upon reasonable notice
and during regular business hours. The agings, report and certification
described above will also be required as a condition precedent to any advance
under the Revolving Loan which would cause the principal amount outstanding
under the Revolving Loan to increase from an amount which is less than or equal
to Five Million Dollars ($5,000,000) to an amount which is greater than Five
Million Dollars ($5,000,000) (although the information provided by Borrower may
be as of the last day of the month preceding the most recently ended calendar
month rather than as of the last day of the most recently ended calendar month
if the request for such advance is made during the first twenty (20) days of a
calendar month), and Bank may also require, as a further condition precedent to
the making of any such advance, the completion of a collateral audit the results
of which are satisfactory to Bank in its sole reasonable discretion.
4.6 QUICK RATIO. Borrower shall maintain at all times a ratio of
cash, accounts receivable and marketable securities to current liabilities of
not less than 1.0:1.0, as such terms are defined by generally accepted
accounting principles.
4.7 TANGIBLE NET WORTH. Borrower will at all times maintain a
Tangible Net Worth of not less than the sum of (a) Twenty-Six Million Dollars
($26,000,000), (b) fifty percent (50%) of Borrower's net profit after taxes for
each fiscal year of Borrower ending on or after January 31, 1997 and on or
before the date of computation, and (c) one hundred percent (100%) of the net
proceeds of any equity securities issued by Borrower on or after December 1,
1996. "Tangible Net Worth" shall mean net worth increased by indebtedness of
Borrower subordinated to Bank and decreased by patents, licenses, trademarks,
trade names, goodwill and other similar intangible assets, organizational
expenses, and monies due from affiliates (including officers, shareholders and
directors).
4.8 DEBT TO TANGIBLE NET WORTH. Borrower will at all times maintain a
ratio of total liabilities to Tangible Net Worth of not greater than .75:1.0.
4.9 PROFITABILITY. Borrower will maintain its net profit after
provision for income taxes and deduction for dividends paid at not less than
One Million Dollars ($1,000,000) for any fiscal year.
4.10 INSURANCE. Borrower will keep all of its insurable property,
real, personal or mixed, insured by good and responsible companies against fire
and such other risks as are customarily insured against by companies conducting
similar business with respect to like properties. Borrower will maintain
adequate worker's compensation insurance and adequate insurance against
liability for damages to persons and property.
4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon demand by
Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other information
concerning its affairs as Bank may request from time to time.
4.12 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly to
Bank upon demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all costs,
expenses and fees incurred by Bank in preparing and documenting this Agreement
and the Loan, and all amendments and modifications thereof, including but not
limited to all filing and recording fees, costs of appraisals, insurance and
attorneys' fees, including the reasonable estimate of the allocated costs and
expenses of in-house legal counsel and legal staff.
4.14 REPORTS UNDER PENSION PLANS. Borrower will furnish to Bank, as
soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
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pension plans of Borrower described in Section 3 above has occurred, a
statement of an authorized officer of Borrower describing such event or
condition and the action, if any, which Borrower proposes to take with respect
thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or
any other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for minor encumbrances and easements on real property
which do not affect its market value, and except for existing liens on
Borrower's personal property and future purchase money security interests
encumbering only the personal property purchased.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain borrowed
money, except pursuant to agreements made with Bank.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another except as permitted under Section 5.6 without
prior written Bank consent.
5.4 LOANS, ADVANCES AND GUARANTEES. Borrower will not, except in the
ordinary course of business as currently conducted, make any loans or advances,
become a guarantor or surety, pledge its credit or properties in any manner or
extend credit.
5.5 INVESTMENTS. Borrower will not purchase the debt or equity of
another person or entity except for savings accounts and certificates of
deposit of Bank, direct U.S. Government obligations and commercial paper issued
by corporations with the top ratings of Xxxxx'x or Standard & Poor's, provided
all such permitted investments shall mature within one year of purchase.
5.6 CHANGES/MERGERS. Borrower will not change its name; liquidate,
dissolve or enter into any consolidation, merger, partnership, joint venture or
other combination; issue, redeem, purchase, retire or otherwise acquire any
shares of any class of capital stock of Borrower in excess of One Million
Dollars ($1,000,000) or grant or issue any warrant, right or option pertaining
thereto or any other security convertible into any of the foregoing except
pursuant to Borrower's employee stock option plan as it may exist from time to
time; reorganize, reclassify or recapitalize its capital stock; prepay any
subordinated debt, debt for borrowed money or debt secured by any permitted
Lien, or enter into or modify any agreement as a result of which the terms of
payment of any such debt are waived or modified.
5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire any
shares of its capital stock for value.
5.8 TRANSACTIONS WITH RELATED PERSONS. Borrower will not directly or
indirectly enter into any transaction with or for the benefit of a Related
Person on terms more favorable to the Related Person than would have been
obtainable in an "arms length" dealing. "Related Person" shall mean any
Affiliate of Borrower, or any officer, employee, director or shareholder of
Borrower or any Affiliate, or a relative of any of the foregoing.
5.9 LOSSES. Borrower will not incur a net loss, after provision for
income taxes, of any amount for any two or more consecutive fiscal quarters.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the other Loan Documents; or
6.2 Any default shall occur under the Note; or
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6.3 Borrower shall default in the due performance or observance of
any covenant or condition of the Loan Documents; or
6.4 Any guaranty or subordination agreement now or hereafter required
hereunder is breached or becomes ineffective, or any guarantor or subordinating
creditor dies, disavows or attempts to revoke or terminate such guaranty or
subordination agreement; or
6.5 There is a change in ownership or control of ten percent (10%) or
more of the issued and outstanding stock of Borrower.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of set off or banker's
lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower, and any assignment by Borrower without Bank's consent shall be null
and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection herewith shall be governed by and
construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of any Note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such Note or
reimbursement agreement shall prevail.
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications,
verbal or written, between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in writing signed
by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
when together shall constitute one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods
and addressed to the respective party at its address given with the signatures
at the end of this Agreement and shall be considered to have been validly
given: (a) upon delivery, if delivered personally; (b) upon receipt, if mailed,
first class postage prepaid, with the United States Postal Service; (c) on the
next business day, if sent by overnight courier service of recognized standing;
and (d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may be
changed from time to time by notice delivered as provided above.
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THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
UNION BANK OF CALIFORNIA, X.X. XXXXX, INC.
By: [SIG] By: [SIG]
----------------------------- -----------------------------
Title Vice President Title
---------------------------- ---------------------------
By: [SIG] By: [SIG]
------------------------------ -----------------------------
Title Vice President Title Senior V.P. CFO
---------------------------- ---------------------------
Address: 000 "X" Xxxxxx, 0xx Xxxxx Address: 0000 Xxxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000 San Diego, CA 9213
Attention: Xxxx XxXxxx Attention: Xxxxxx Xxxxxxx
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Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
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Telephone: (000) 000-0000 Telephone: (000) 000-0000
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