ANNEX A
to CREDIT AGREEMENT
(DEFINITIONS)
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings.
"Account" means an account (as that term is defined in the Code), and any
and all supporting obligations in respect thereof.
"Account Debtor" means any Person who is obligated under, with respect to,
or on account of, an Account, chattel paper, or a General Intangible.
"ACH Transactions" means any cash management or related services (including
the Automated Clearing House processing of electronic funds transfers through
the direct Federal Reserve Fedline system) provided by a Bank Product Provider
for the account of Borrower or its Subsidiaries.
"Adjusted Consolidated EBITDA" means, with reference to any period, the
Consolidated EBITDA of Borrower and its Subsidiaries for such period plus, for
the fiscal year ended January 31, 2004, an amount not to exceed $15,000,000 for
severance charges incurred during such fiscal year.
"Adjusted Consolidated EBITDA Coverage Ratio" means, at any time, the ratio
of (a) Adjusted Consolidated EBITDA for the four consecutive fiscal quarters
ended on or most recently to such date to (b) the sum of (i) Interest Expense
for the four consecutive fiscal quarters ended on or most recently to such date
plus (ii) the current portion of the long term Indebtedness of Borrower and its
Subsidiaries as of the end of the immediately preceding fiscal year.
"Affiliate" means, as applied to any Person, any other Person who, directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" means the possession, directly or indirectly through one or more
intermediaries, of the power to direct the management and policies of a Person,
whether through the ownership of stock, by contract, or otherwise; provided,
however, that, for purposes of the definition of Eligible Accounts and Section
5.10 hereof: (a) any Person which owns directly or indirectly 10% or more of the
Stock having ordinary voting power for the election of directors or other
members of the governing body of a Person or 10% or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed an Affiliate of such Person, (b) each director (or
comparable manager) of a Person shall be deemed to be an Affiliate of such
Person and (c) each partnership or joint venture in which a Person is a partner
or joint venturer shall be deemed an Affiliate of such Person.
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"Bank Product" means any financial accommodation extended to Borrower or
its Subsidiaries by Bank including: (a) credit cards, (b) credit card processing
services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash
management, including controlled disbursement, accounts or services or (g)
transactions under Hedge Agreements.
"Bank Product Agreements" means those agreements entered into from time to
time by Borrower or any of its Subsidiaries with Bank in connection with any
Bank Products.
"Bank Product Obligations" means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Borrower or its
Subsidiaries to Bank pursuant to or evidenced by the Bank Product Agreements and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all such amounts that Borrower or its Subsidiaries are obligated
to reimburse to Bank as a result of Bank purchasing participations from, or
executing indemnities or reimbursement obligations to, Bank with respect to the
Bank Products provided by Bank to Borrower or its Subsidiaries.
"Bankruptcy Code" means title 11 of the United States Code, as in effect
from time to time.
"Borrower" has the meaning set forth in the preamble to this Agreement.
"Borrowing Base" means, as of any date of determination, the result of:
(a) 80% of the amount of Eligible Accounts, less the amount, if
any, of the Dilution Reserve, plus
(b) the lower of:
(i) the Maximum Inventory Amount, and
(ii) the sum of:
(A) the Designated Finished Goods Advance Rate of the
value of Eligible Finished Goods Inventory, plus
(B) the Designated ATS Advance Rate of the value of
Eligible ATS Inventory, plus
(C) 50% of the value of Eligible Raw Material
Inventory, minus
(c) such reserves as the Bank, in the exercise of its reasonable
credit judgment, determines are necessary or appropriate, including,
without limitation, a $100,000 reserve for the payment of licensing
royalties payable in connection with the sale of inventory.
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"Borrowing Base Certificate" means a certificate substantially in the form
of Exhibit B delivered by the chief financial officer of Borrower to Bank.
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which banks are authorized or required to close in the state of California,
except that, if a determination of a Business Day shall relate to a LIBOR rate
loan, the term "Business Day" also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means that portion of the obligations under
a Capital Lease that is required to be capitalized in accordance with GAAP.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Rating Group ("S&P") or ▇▇▇▇▇'▇ Investor Service, Inc.
("Moody's"), (c) commercial paper maturing no more than 270 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1, from S&P or at least P-1 from Moody's, (d) certificates of deposit or
bankers' acceptances maturing within 1 year from the date of acquisition thereof
issued by any bank organized under the laws of the United States or any state
thereof having at the date of acquisition thereof combined capital and surplus
of not less than $250,000,000, (e) demand Deposit Accounts maintained with any
bank organized under the laws of the United States or any state thereof so long
as the amount maintained with any individual bank is less than or equal to
$100,000 and is insured by the Federal Deposit Insurance Corporation and (f)
Investments in money market funds substantially all of whose assets are invested
in the types of assets described in clauses (a) through (e) above.
"Change of Control" means that (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934,
as amended), other than members of the Virtue family, becomes the beneficial
owner (as defined in Rule 13d-3 under such Act), directly or indirectly, of 20%
or more, of the capital stock of Borrower having the right to vote for the
election of members of the Board of Directors or (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors.
"Closing Date" means the date of the making of the initial Advance and the
Term Loan (or other extension of credit) hereunder.
"Code" means the California Uniform Commercial Code, as in effect from time
to time.
"Collateral" means all assets and interests in assets and proceeds thereof
now owned or hereafter acquired by Borrower, any Guarantor or any of their
respective Subsidiaries in or upon which a Lien is granted to Bank under any of
the Loan Documents.
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"Collateral Access Agreement" means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in Borrower's or its Subsidiaries' books and records, Equipment or Inventory, in
each case, in form and substance satisfactory to Bank.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C delivered by the chief financial officer of Borrower to Bank.
"Consolidated EBITDA" means, with reference to any period, Net Income for
such period plus the sum of all amounts deducted in determining such Net Income
in respect of (a) Interest Expense for such period, (b) federal, state and local
income taxes for such period and (c) depreciation of fixed assets and
amortization of intangible assets for such period; minus the sum of (x) gains
from sales of capital assets in such period, (y) any income or gain from
extraordinary items in such period and (z) income or gain from non-recurring
items in such period, in each case of clauses (a), (b), (c), (x) and (w), as
determined in accordance with GAAP.
"Continuing Director" means (a) any member of the Board of Directors who
was a director (or comparable manager) of Borrower on the Closing Date, and (b)
any individual who becomes a member of the Board of Directors after the Closing
Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual threatened election contest
relating to the election of the directors (or comparable managers) of Borrower
and whose initial assumption of office resulted from such contest or the
settlement thereof.
"Default" means an event, condition, or default that, with the giving of
notice, the passage of time, or both, would be an Event of Default.
"Designated ATS Advance Rate" means, at any date, a percentage equal to (a)
if such date is on or after March 1 and on or before July 31 of each year, 50%
and (b) at all other times, 20%.
"Designated Finished Goods Advance Rate" means, at any date, a percentage
equal to (a) if such date is on or after March 1 and on or before July 31 of
each year, 60% and (b) at all other times, 50%.
"Dilution" means, at any date, a percentage, based upon the experience of
the immediately prior 30 consecutive days, that is the result of dividing the
Dollar amount of (a) bad debt write-downs, discounts, advertising allowances,
credits, returns of merchandise, freight allowances, notes taken in lieu of
payment, miscellaneous credits and adjustments, or other dilutive items with
respect to Borrower's Accounts during such period, by (b) Borrower's gross
▇▇▇▇▇▇▇▇ with respect to Accounts during such period.
"Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible Accounts as follows:
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IF DILUTION IS: THEN THE DILUTION RESERVE IS:
------------------------------------ -----------------------------------------------------
Less than 5.0% - 0 -
5.0% or greater but less than 10.0% An amount sufficient to reduce advance rates by 5.0%
10.0% or greater but less than 15.0% An amount sufficient to reduce advance rates by 10.0%
15.0% or greater but less than 20.0% An amount sufficient to reduce advance rates by 15.0%
20.0% or greater but less than 25.0% An amount sufficient to reduce advance rates by 20.0%
25.0% or greater but less than 30.0% An amount sufficient to reduce advance rates by 25.0%
For each additional 5.0% increase in An amount sufficient to reduce advance rates by an
Dilution incremental 5.0%
"Dollars" or "$" means United States dollars.
"Eligible Accounts" means those Accounts created by Borrower in the
ordinary course of its business, that arise out of Borrower's sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan Documents, and that are
not excluded as ineligible by virtue of one or more of the excluding criteria
set forth below; provided, however, that such criteria may be revised from time
to time by Bank in Bank's discretion to address the results of any audit
performed by Bank from time to time after the Closing Date. In determining the
amount to be included, Eligible Accounts shall be calculated net of customer
deposits and unapplied cash and shall not give effect to any credits reflected
on Borrower's agings that would otherwise reduce the amount of ineligible
Accounts. Eligible Accounts shall not include the following:
(a) (i) with respect to Accounts due on or before the date that is 30
days after the original invoice date thereof, Accounts that the Account
Debtor has failed to pay within 90 days of the original invoice date
therefor or within 60 days of the due date thereof, or
(ii) with respect to Accounts due on or after the date that is 31
days after the original invoice date thereof, Accounts that the Account
Debtor has failed to pay within 120 days of the original invoice date
therefor or within 30 days of the due date thereof; provided, however, that
no Accounts shall constitute Eligible Accounts hereunder if such Accounts
are outstanding (or provide terms of payment) more than 180 days after the
original invoice thereof,
(b) Accounts owed by an Account Debtor (or its Affiliates) where 20%
or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above,
(c) Accounts with respect to which the Account Debtor is an Affiliate
of Borrower or an employee or agent of Borrower or any Affiliate of
Borrower,
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(d) Accounts arising in a transaction wherein goods are placed on
consignment or are sold pursuant to a guaranteed sale, a sale or return, a
sale on approval, a ▇▇▇▇ and hold, a cash on delivery or any other terms by
reason of which the payment by the Account Debtor may be conditional,
(e) Accounts that are not payable in Dollars,
(f) Accounts with respect to which the Account Debtor either (i) does
not maintain its chief executive office in the United States, or (ii) is
not organized under the laws of the United States or any state thereof, or
(iii) is the government of any foreign country or sovereign state, or of
any state, province, municipality, or other political subdivision thereof,
or of any department, agency, public corporation, or other instrumentality
thereof, unless (y) the Account is supported by an irrevocable letter of
credit satisfactory to Bank (as to form, substance, and issuer or domestic
confirming bank) that has been delivered to Bank and is directly drawable
by Bank, or (z) the Account is covered by credit insurance in form,
substance, and amount, and by an insurer, satisfactory to Bank,
(g) Accounts with respect to which the Account Debtor is either the
United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which Borrower has
complied, to the reasonable satisfaction of Bank, with the Assignment of
Claims Act, 31 USC Section 3727),
(h) Accounts with respect to which the Account Debtor is a creditor
of Borrower, has or has asserted a right of setoff, has disputed its
obligation to pay all or any portion of the Account, or is the subject of
litigation (including any collection actions) undertaken by Borrower,
(i) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed 20% (such percentage as applied to a
particular Account Debtor being subject to reduction by Bank in its
discretion if the creditworthiness of such Account Debtor deteriorates) of
all Eligible Accounts, to the extent of the obligations owing by such
Account Debtor in excess of such percentage; provided, however, that, in
each case, the amount of Eligible Accounts that are excluded because they
exceed the foregoing percentage shall be determined by Bank based on all of
the otherwise Eligible Accounts prior to giving effect to any eliminations
based upon the foregoing concentration limit,
(j) Accounts with respect to which the Account Debtor is subject to
an Insolvency Proceeding, is not Solvent, has gone out of business, or as
to which Borrower has received notice of an imminent Insolvency Proceeding
or a material impairment of the financial condition of such Account Debtor
or as to which Borrower has referred the Account Debtor to Borrower's legal
or collection department (or a third Person providing such services),
(k) Accounts with respect to which the Account Debtor is located in a
state or jurisdiction (e.g., New Jersey, Minnesota, and West Virginia) that
requires, as a condition
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to access to the courts of such jurisdiction, that a creditor qualify to
transact business, file a business activities report or other report or
form, or take one or more other actions, unless Borrower has so qualified,
filed such reports or forms, or taken such actions (and, in each case, paid
any required fees or other charges), except to the extent that Borrower may
qualify subsequently as a foreign entity authorized to transact business in
such state or jurisdiction and gain access to such courts, without
incurring any cost or penalty viewed by Bank to be significant in amount,
and such later qualification cures any access to such courts to enforce
payment of such Account,
(l) Accounts, the collection of which, Bank, in its discretion,
believes to be doubtful by reason of the Account Debtor's financial
condition,
(m) Accounts that are not subject to a valid and perfected first
priority Lien in favor of Bank,
(n) Accounts with respect to which (i) the goods giving rise to such
Account have not been shipped and billed to the Account Debtor, or (ii) the
services giving rise to such Account have not been performed and billed to
the Account Debtor,
(o) Accounts that represent the right to receive progress payments or
other advance ▇▇▇▇▇▇▇▇ that are due prior to the completion of performance
by Borrower of the subject contract for goods or services, or
(p) Accounts representing service, finance, late or collection
charges, to the extent of such service, finance, late or collection
charges.
"Eligible ATS Inventory" means Inventory that qualifies as Eligible
Finished Goods Inventory except for the fact that such Inventory constitutes
"assemble-to-ship" ("ATS") Inventory.
"Eligible Finished Goods Inventory" means Inventory consisting of first
quality finished goods held for sale in the ordinary course of Borrower's
business that complies with each of the representations and warranties
respecting Eligible Finished Goods Inventory made in the Loan Documents, and
that is not excluded as ineligible by virtue of the one or more of the excluding
criteria set forth below; provided, however, that such criteria may be revised
from time to time by Bank in Bank's discretion to address the results of any
audit or appraisal performed by Bank from time to time after the Closing Date.
In determining the amount to be so included, Inventory shall be valued at the
lower of cost or market on a basis consistent with Borrower's historical
accounting practices. An item of Inventory shall not be included in Eligible
Inventory if:
(a) Borrower does not have good, valid, and marketable title thereto,
(b) it is not located at one of the locations in the continental
United States set forth on Schedule E-1 or in transit from one such
location to another such location,
(c) it is located on real property leased by Borrower or in a
contract warehouse, in each case, unless it is subject to a Collateral
Access Agreement (except if the leased real property is Borrower's facility
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
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California, in which case no Collateral Access Agreement shall be required)
executed by the lessor or warehouseman, as the case may be, and unless it
is segregated or otherwise separately identifiable from goods of others, if
any, stored on the premises,
(d) it is not subject to a valid and perfected first priority Lien in
favor of the Bank,
(e) it consists of goods returned or rejected by Borrower's customers
or
(f) it consists of goods that are obsolete or slow moving,
restrictive or custom items, work-in-process, raw materials, or goods that
constitute spare parts, packaging and shipping materials, supplies used or
consumed in Borrower's business, ▇▇▇▇ and hold goods, defective or damaged
goods, "seconds," or Inventory sold or acquired on consignment, or
(g) it contains or bears any intellectual property rights licensed to
Borrower or any Subsidiary, unless Bank is reasonably satisfied that it may
sell or otherwise dispose of such Inventory without (i) infringing the
rights of such licensor, (ii) violating any contract with such licensor, or
(iii) incurring any liability with respect to payment of royalties other
than royalties incurred pursuant to sale of such Inventory under the
current licensing agreement.
"Eligible Inventory" means Eligible ATS Inventory, Eligible Finished Goods
Inventory or Eligible Raw Material Inventory.
"Eligible Raw Material Inventory" means Inventory that qualifies as
Eligible Finished Goods Inventory except for the fact that such Inventory
constitutes raw materials.
"Equipment" means equipment (as that term is defined in the Code) and
includes machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), computer hardware, tools, parts, and goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"Event of Default" has the meaning set forth in Section 6.1.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"Governing Documents" means, with respect to any Person, the certificate of
formation, articles of incorporation, by-laws, operating agreement, limited
partnership agreement, partnership agreement, joint venture agreement or other
organizational documents of such Person.
"Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
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"Guarantied Obligations" means, at any date, all guaranties or similar
contingent obligations of Borrower and its Subsidiaries as of such date. The
amount of any guaranty shall be deemed to be the lower of (x) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such guaranty is made and (y) the maximum amount for which Borrower or its
Subsidiary may be liable pursuant to the terms of the instrument embodying such
guarantee, unless such primary obligation and the maximum amount for which
Borrower or such Subsidiary may be liable are not stated or determinable, in
which case the amount of such guaranty shall be Borrower's or such Subsidiary's
maximum reasonably anticipated liability in respect thereof as determined by
Borrower in good faith.
"Guarantor" means each of Virco Inc., a Delaware corporation, Virco Mgmt.
Corporation, a Delaware corporation, and any other Person that at any time
executes a Guaranty or any other guaranty in favor of Bank with respect to the
Obligations or whose assets, directly or indirectly, are at any time pledged as
security for the Obligations.
"Guaranty" means each guaranty, executed and delivered by each Guarantor in
favor of Bank, in form and substance satisfactory to Bank, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Hedge Agreement" means any and all agreements or documents now existing or
hereafter entered into by Borrower or its Subsidiaries that provide for an
interest rate, credit, commodity or equity swap, cap, floor, collar, forward
foreign exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging Borrower's or its Subsidiaries'
exposure to fluctuations in interest or exchange rates, loan, credit exchange,
security or currency valuations or commodity prices.
"Indebtedness" means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations as a lessee under Capital Leases, (d) all obligations or liabilities
of others secured by a Lien on any asset of a Person or its Subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all
obligations to pay the deferred purchase price of assets (other than trade
payables incurred in the ordinary course of business and repayable in accordance
with customary trade practices), (f) all obligations owing under Hedge
Agreements and (g) any obligation guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with
recourse) any obligation of any other Person that constitutes Indebtedness under
any of clauses (a) through (f) above.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other state or
federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
receivership, or proceedings seeking reorganization, arrangement, or other
similar relief.
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"Interest Expense" means, with reference to any period, the aggregate of
the interest expense of Borrower and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Inventory" means inventory (as that term is defined in the Code).
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases or other
acquisitions of Indebtedness, stock, or all or substantially all of the assets
of such other Person (or of any division or business line of such other Person),
and any other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
"Investment Property" means investment property (as that term is defined in
the Code), and any and all supporting obligations in respect thereof.
"IRB Indebtedness" means Indebtedness of Borrower issued and outstanding
under the Loan Agreement dated as of December 1, 1994, among the Industrial
Development Authority of the City of Torrance, U.S. Trust Company of California,
N.A., as Trustee, and Borrower, as in effect on the Closing Date.
"LC Usage Amount" means, at any time, the sum of (a) the aggregate
outstanding principal amount of Advances on such date plus (b) the Letter of
Credit Usage on such date.
"Letter of Credit Usage" means, at any date, the aggregate undrawn amount
of all outstanding Letters of Credit on such date.
"Leverage Ratio" means, at any date, the ratio of (a) Total Funded Debt at
such date to (b) Adjusted Consolidated EBITDA for the four consecutive fiscal
quarters ended on or most recently to such date.
"Lien" means any interest in an asset securing an obligation owed to, or a
claim by, any Person other than the owner of the asset, irrespective of whether
(a) such interest is based on the common law, statute, or contract, (b) such
interest is recorded or perfected, and (c) such interest is contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, conditional sale or trust receipt, or from a
lease, consignment, or bailment for security purposes and also includes
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.
"Line of Credit Period" means the period from and including the Closing
Date to but not including the Line of Credit Termination Date.
"Line of Credit Termination Date" means August 1, 2005.
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"Loan Disbursement Order" means an instructional letter executed and
delivered by Borrower to Bank regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is satisfactory to Bank.
"Loan Documents" means this Agreement, the Bank Product Agreements, the
Guaranties, the Security Agreements, any note or notes executed by Borrower in
connection with this Agreement and payable to Bank, and any other agreement
entered into, now or in the future, by Borrower, any Guarantor or any of their
respective Affiliates and Bank in connection with this Agreement or any of the
foregoing agreements.
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a
whole, (b) a material impairment of Borrower's and its Subsidiaries' ability to
perform their obligations under the Loan Documents to which they are parties or
of Bank's ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of the Bank's Liens
with respect to the Collateral as a result of an action or failure to act on the
part of Borrower or its Subsidiaries.
"Maximum Inventory Amount" means, at any date, an amount equal to (a) if
such date is on or after March 1 and on or before July 31, $25,000,000 and (b)
at all other times, $15,000,000.
"Maximum Line of Credit Amount" means $45,000,000.
"Mortgages" means, individually and collectively, one or more mortgages,
deeds of trust, or deeds to secure debt, executed and delivered by Borrower or
its Subsidiaries in favor of Bank, in form and substance satisfactory to Bank,
that encumber the Real Property Collateral and the related improvements thereto.
"Mortgage Related Documents" means, with respect to each parcel composing
the Real Property Collateral, each of the following, in each case in form, scope
and substance satisfactory to Bank:
(a) marked-up commitments for a policy of title insurance, insuring
the first priority of Bank's Liens, with title insurance companies (the
"Title Companies") acceptable to Bank on each of parcel subject to a
Mortgage, with the final title insurance policy being delivered within
thirty (30) days of the Closing Date;
(b) any customary affidavits and indemnities in favor of the Title
Companies as may be required or necessary to obtain title insurance
satisfactory to Bank;
(c) copies of all recorded documents creating exceptions to the title
policy referred to in Paragraph (a) above;
(d) a survey; and, the surveyors retained for such survey shall be
acceptable to Bank;
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(e) environmental assessments, audits or reports as Bank may request;
and, the environmental consultants retained for such assessments, audits or
reports shall be acceptable to Bank;
(f) evidence of property and liability insurance on such parcel in
form and substance acceptable to Bank naming Bank as first mortgagee; and
(g) such other certificates, documents and information as are
reasonably requested by Bank, including, without limitation, permanent
certificates of occupancy and evidence of zoning.
"Net Income" means, with reference to any period, the net income (or net
loss) of Borrower and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from Net Income (a) the net income (or net loss) of any Person accrued
prior to the date it becomes a Subsidiary of, or has merged into or consolidated
with, Borrower or any of its Subsidiaries; and (b) the net income (or net loss)
of any Person (other than a Guarantor) in which Borrower or any of its
Subsidiaries has a equity interest in, except to the extent of the amount of
dividends or other distributions actually received by Borrower or such Guarantor
during such period.
"Obligations" means (a) all loans (including the Term Loan), Advances,
debts, principal, interest (including any interest that, but for the
commencement of an Insolvency Proceeding, would have accrued), contingent
reimbursement obligations with respect to outstanding Letters of Credit,
premiums, liabilities, obligations (including indemnification obligations),
fees, charges, costs, expenses, lease payments, guaranties, covenants, and
duties of any kind and description owing by Borrower or a Guarantor to Bank
pursuant to or evidenced by the Loan Documents and irrespective of whether for
the payment of money, whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, and including all interest not
paid when due, and (b) all Bank Product Obligations. Any reference in this
Agreement or in the Loan Documents to the Obligations shall include all
extensions, modifications, renewals or alterations thereof, both prior and
subsequent to any Insolvency Proceeding.
"Permitted Liens" has the meaning set forth in Section 5.5.
"Person" means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"Real Property" means any estates or interests in real property now owned
or hereafter acquired by Borrower or its Subsidiaries and the improvements
thereto.
"Real Property Collateral" means the parcel or parcels of Real Property
identified on Schedule R-1 and any Real Property hereafter acquired by Borrower
or its Subsidiaries.
12
"Security Agreement" means the security agreement among Borrower,
Guarantors and Bank, in form and substance satisfactory to Bank, as amended,
restated, supplemented or otherwise modified from time to time.
"Solvent" means, with respect to any Person on a particular date, that, at
fair valuations, the sum of such Person's assets is greater than all of such
Person's debts.
"Subsidiary" of a Person means a corporation, partnership, limited
partnership, limited liability company, or other entity in which that Person
directly or indirectly owns or controls the shares of Stock having ordinary
voting power to elect a majority of the board of directors (or appoint other
comparable managers) of such corporation, partnership, limited liability
company, or other entity. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement and the other Loan Documents
shall refer to a Subsidiary or Subsidiaries of Borrower.
"Tangible Net Worth" means, at any date, the result of (a) Borrower's total
stockholders' equity plus (b) subordinated Indebtedness of Borrower and its
Subsidiaries minus (c) any intangible assets of Borrower and its Subsidiaries.
"Term Loan" has the meaning set forth in Section 1.1(d).
"Term Loan Termination Date" means January 31, 2007.
"Term Note" has the meaning set forth in Section 1.1(d).
"Total Funded Debt" means, at any date, the sum of (a) Indebtedness and all
other interest bearing liabilities of Borrower and its Subsidiaries plus (b) all
Guarantied Obligations of Borrower and its Subsidiaries, in each case
outstanding as of such date.
"Total Liabilities" means, at any date, the sum of (a) Indebtedness and all
other liabilities of Borrower and its Subsidiaries plus (b) all Guarantied
Obligations of Borrower and its Subsidiaries, in each case outstanding as of
such date.
Accounting Terms and Determinations. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP. All financial
statements required to be delivered hereunder shall be prepared in accordance
with GAAP as in effect from time to time, applied on a basis consistent (except
for changes concurred in by the Borrower's independent public accountants) with
the most recent audited consolidated financial statements of the Borrower and
its Subsidiaries delivered to the Lender.
Other Definitional Provisions. References in this Agreement to "Articles",
"Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules
or Exhibits of or to this Agreement unless otherwise specifically provided. Any
of the terms defined in Annex A may, unless the context otherwise requires, be
used in the singular or plural depending on the reference. "Include" or
"includes" and "including" shall be deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import. "Writing", "written" and comparable terms refer to printing, typing
and other means of
13
reproducing words in a visible form. References to any agreement or contract are
to such agreement or contract as amended, modified or supplemented from time to
time in accordance with the terms hereof and thereof. References to any Person
include the successors and assigns of such Person. References "from" or
"through" any date mean, unless otherwise specified, "from and including" or
"through and including", respectively.
14
EXHIBIT A-1
FORM OF
REVOLVING LINE OF CREDIT NOTE
$45,000,000 West Covina, California
January 27, 2004
FOR VALUE RECEIVED, the undersigned VIRCO MFG. CORPORATION ("Borrower")
promises to pay to the order of ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at San ▇▇▇▇▇▇▇ Valley Regional Commercial Banking Office, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, 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 Forty Five Million Dollars
($45,000,000), 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.
This Revolving Line of Credit Note (this "Note") is the Line of Credit Note
issued pursuant to the Credit Agreement dated as of January 27, 2004 (as
amended, restated, supplemented or otherwise modified, the "Credit Agreement")
between Borrower and Bank. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined. Reference hereby is
made to the Loan Documents for a description of the assets in which a Lien has
been granted, the nature and extent of the security and the guaranties, the
terms and conditions upon which the Liens and each guaranty were granted and the
rights of the holder of this Note in respect thereof.
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) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3), six (6), nine (9) or twelve (12)
months, as designated by 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 $1,000,000; and provided further, that no Fixed Rate
Term shall extend beyond the Line of Credit Termination Date. 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.
(b) "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
1
(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. 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.
(c) "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 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum equal to the Prime Rate in effect from time
to time plus 0.50% or (ii) at a fixed rate per annum determined by Bank equal to
LIBOR in effect on the first day of the applicable Fixed Rate Term plus 2.75%.
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
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 or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, 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 Borrower. At such time as
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, Borrower shall give Bank
2
notice specifying: (i) the interest rate option selected by Borrower; (ii) the
principal amount subject thereto; and (iii) for each LIBOR selection, the length
of the applicable Fixed Rate Term; provided, however, that if an Event of
Default has occurred and is continuing, Borrower may not elect to continue or
convert any Advance outstanding hereunder into a LIBOR rate loan. Any such
notice may be given by telephone (or such other electronic method as Bank may
permit) so long as, with respect to each LIBOR selection, (A) if requested by
Bank, Borrower provides to Bank written confirmation thereof not later than
three (3) Business Days after such notice is given, and (B) such notice is given
to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a
later time during any Business Day if Bank, at it's sole option but without
obligation to do so, accepts Borrower's notice and quotes a fixed rate to
Borrower. If Borrower does not immediately accept a fixed rate when quoted by
Bank, the quoted rate shall expire and any subsequent LIBOR request from
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate. 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, 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) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any Governmental Authority
and related in any manner to LIBOR, and (ii) future, supplemental, emergency or
other changes in the LIBOR Reserve Percentage, assessment rates imposed by the
Federal Deposit Insurance Corporation, or similar requirements or costs imposed
by any Governmental Authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR. In determining which
of the foregoing are attributable to any LIBOR option available to Borrower
hereunder, any reasonable allocation made by Bank among its operations shall be
conclusive and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be payable on
the first day of each month, commencing February 1, 2004.
(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. Borrower 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 set forth above or such lesser
amount as shall at any time be available hereunder, as set forth in the Credit
Agreement. The
3
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 Line of Credit Termination Date.
(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)
▇▇▇▇▇▇ ▇. Virtue, ▇▇▇▇▇▇ Dose, ▇▇▇▇ Virtue or ▇▇▇▇▇▇ ▇▇▇, any one of them 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 deposit account of Borrower, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of 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 is or has been authorized by 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. Borrower 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. Borrower 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 $1,000,000; 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 Borrower, 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,
Borrower 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
4
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.
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 extent of such costs, expenses and/or
liabilities. 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 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 two percent (2%) above the Prime
Rate in effect from time to time (computed on the basis of a 360 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.
(c) The principal Indebtedness evidenced hereby shall be payable as
follows and without set off, counterclaim or reduction of any kind:
(i) the amount, if any, by which the LC Usage Amount at any time
exceeds the lesser of the Revolving Commitment or the Borrowing Base at
such date shall be payable immediately; and
(ii) the principal Indebtedness evidenced hereby shall be payable on
the Line of Credit Termination Date
EVENTS OF DEFAULT:
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) 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.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
[Signature Page Follows]
5
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
VIRCO MFG. CORPORATION
By: _______________________
Title: ____________________
6
EXHIBIT A-2
FORM OF
TERM NOTE
$12,500,000 West Covina, California
January 27, 2004
FOR VALUE RECEIVED, the undersigned VIRCO MFG. CORPORATION ("Borrower")
promises to pay to the order of ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at San ▇▇▇▇▇▇▇ Valley Regional Commercial Banking Office, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, 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 $12,500,000, with interest
thereon as set forth herein.
This Term Note (this "Note") is the Term Note issued pursuant to the Credit
Agreement dated as of January 27, 2004 (as amended, restated, supplemented or
otherwise modified, the "Credit Agreement") between Borrower and Bank. Terms
defined in the Credit Agreement and not otherwise defined herein are used herein
as therein defined. Reference hereby is made to the Loan Documents for a
description of the assets in which a Lien has been granted, the nature and
extent of the security and the guaranties, the terms and conditions upon which
the Liens and each guaranty were granted and the rights of the holder of this
Note in respect thereof.
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) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3), six (6), nine (9) or twelve (12)
months, as designated by 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 $1,000,000; and provided further, that no Fixed Rate
Term shall extend beyond the Term Loan Termination Date. 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.
(b) "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
1
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. 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.
(c) "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 360-day year, actual days elapsed) either
at a (i) fluctuating rate per annum equal to the Prime Rate in effect from time
to time plus 0.75%, or (ii) at a fixed rate per annum determined by Bank equal
to LIBOR in effect on the first day of the applicable Fixed Rate Term plus
3.25%. 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
Borrower at the end the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, 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 Borrower. At the time this
Note is disbursed or Borrower 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, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term;
provided, however, that if an
2
Event of Default has occurred and is continuing, Borrower may not elect to
continue or convert any portion of the Term Loan outstanding hereunder into a
LIBOR rate loan. Any such notice may be given by telephone (or such other
electronic method as Bank may permit) so long as, with respect to each LIBOR
selection, (A) if requested by Bank, Borrower provides to Bank written
confirmation thereof not later than three (3) Business Days after such notice is
given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day
of the Fixed Rate Term, or at a later time during any Business Day if Bank, at
it's sole option but without obligation to do so, accepts Borrower's notice and
quotes a fixed rate to Borrower. If Borrower does not immediately accept a fixed
rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR
request from Borrower shall be subject to a redetermination by Bank of the
applicable fixed rate. If no specific designation of interest is made at the
time this Note is disbursed or at the end of any Fixed Rate Term, Borrower shall
be deemed to have made a Prime Rate interest selection for this Note or the
principal amount to which such Fixed Rate Term applied.
(c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any Governmental Authority
and related in any manner to LIBOR, and (ii) future, supplemental, emergency or
other changes in the LIBOR Reserve Percentage, assessment rates imposed by the
Federal Deposit Insurance Corporation, or similar requirements or costs imposed
by any Governmental Authority or resulting from compliance by Bank with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR. In determining which
of the foregoing are attributable to any LIBOR option available to Borrower
hereunder, any reasonable allocation made by Bank among its operations shall be
conclusive and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be payable on
the first day of each month, commencing February 1, 2004.
(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. The Term Loan evidenced hereby shall be payable as follows
and without set off, counterclaim or reduction of any kind:
(i) an installment of principal equal to $520,833.34 shall be due and
payable on each January 31, April 30, July 31 and October 31 of each year,
commencing on April 30, 2004;
3
(ii) on the date of the consummation of any disposition of any assets
of Borrower or any of its Subsidiaries (other than a disposition permitted
by Section 5.6 of the Credit Agreement), an amount of the cash proceeds
received in connection such disposition equal to the excess, if any, of the
aggregate cash proceeds received in connection with all dispositions of
assets (other than those permitted by Section 5.6 of the Credit Agreement)
less (A) any fees, costs, commissions and expenses reasonably incurred in
connection with such dispositions and (B) the taxes actually paid or to be
payable by Borrower (as estimated by the chief financial officer of
Borrower, giving effect to the overall tax position of Borrower), over
$500,000, shall be payable in respect of the Indebtedness evidenced hereby;
such payment shall be applied in the inverse order of the maturities due
hereunder (and, Borrower acknowledges that nothing contained in this
subclause (ii) shall permit Borrower or any of its Subsidiaries to sell or
otherwise dispose of any assets other than in accordance with Section 5.6
of the Credit Agreement); and
(iii) the principal Indebtedness evidenced hereby shall be payable on
the Term Loan Termination Date.
(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, 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.
(c) Prepayment.
Prime Rate. Borrower 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. Any such prepayment shall be applied in the inverse
order of the maturities due hereunder.
LIBOR. Borrower 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 $1,000,000; 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 Borrower, 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,
Borrower 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.
4
(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.
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 extent of such costs, expenses and/or
liabilities. 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 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 two percent (2%) above the Prime
Rate in effect from time to time (computed on the basis of a 360 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.
All prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.
EVENTS OF DEFAULT:
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) 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.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
[Signature Page Follows]
5
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
VIRCO MFG. CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Dose
-------------------
Title: VP Finance
6
EXHIBIT B
FORM OF
BORROWING BASE CERTIFICATE
EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE
SCHEDULE 2.11
ENVIRONMENTAL MATTERS
None
SCHEDULE E-1
EQUIPMENT/INVENTORY LOCATIONS
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE R-1
REAL PROPERTY COLLATERAL
1. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇; 1,200,000 sq. ft.
2. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇; 375,000 sq. ft.
3. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇; 150,000 sq. ft.