THIRD MODIFICATION AGREEMENT
BY THIS THIRD MODIFICATION AGREEMENT (the "Agreement"), made and
entered into as of the 5th day of August, 1996, ▇▇▇▇▇ FARGO BANK OF ARIZONA,
NATIONAL ASSOCIATION, formerly known as FIRST INTERSTATE BANK OF ARIZONA, N.A.,
whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Corporate
Banking Division (hereinafter called "Lender"), and THREE-FIVE SYSTEMS, INC., a
Delaware corporation, whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇ (hereinafter called "Borrower"), in consideration of the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, hereby confirm and
agree as follows:
SECTION 1. RECITALS.
1.1 Borrower and Lender entered into a Loan Agreement dated July 11,
1994 (the "Loan Agreement"), which provided for a revolving line of credit by
Lender to Borrower in the amount of $5,000,000.00 (the "Revolving Commitment
Amount") upon the terms and conditions contained therein (the "Revolving Credit
Loan").
1.2 The Loan was evidenced by a Revolving Promissory Note dated July
11, 1994, executed by Borrower, payable to the order of Lender, in the principal
amount of $5,000,000.00 (the "Revolving Note"). (Hereinafter the Loan Agreement
and the Revolving Note are referred to as the "Loan Documents.")
1.3 Lender and Borrower have executed and delivered previously a
Modification Agreement dated as of June 28, 1995 and a Second Modification
Agreement dated as of ________________ (together, the "Modifications") modifying
the terms of the Loan Documents. Hereinafter, "Revolving Note," and "Loan
Agreement" shall mean such documents as modified in the Modifications.
1.4 Borrower and Lender desire to modify the Loan Documents as set
forth herein.
1.5 All undefined capitalized terms used herein shall have the meaning
given them in the Loan Agreement.
SECTION 2. REVOLVING NOTE.
As of the date hereof, prior to the effect of the modifications
contained herein, the outstanding principal balance of the Revolving Note is
$___________.
SECTION 3. LOAN AGREEMENT.
3.1 The Loan Agreement is hereby amended as follows:
(a) Section 7.4 of the Loan Agreement is amended to read as
follows:
Section 7.4 Declare or pay any cash dividend or
purchase any treasury stock greater than $8,000,000.00.
(b) Section 7.8 of the Loan Agreement is amended to read as
follows:
Section 7.8 Permit its Tangible Net Worth to be: (a)
less than $41,606,000.00 as of September 30, 1996; and (b) on
each subsequent Quarterly End Date, less than $41,606,000.00
plus fifty percent (50%) of the aggregate of Borrower's
positive net income of each subsequent quarterly period, with
no deduction for any quarterly period net loss.
(c) Section 7.12 of the Loan Agreement is amended to read as
follows:
Section 7.12 Permit the ratio of Borrower's Current
Assets to its Current Liabilities at the end of any fiscal
quarter to be less than 2.0 to 1.0 with both Current Assets
and Current Liabilities determined in accordance with
generally accepted accounting principles, except that Current
Liabilities shall include all amounts outstanding under the
RLC including without limitation amounts due and payable
beyond a year.
SECTION 4. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS.
4.1 All references to the Loan Agreement in the Revolving Note are
hereby amended to refer to the Loan Agreement as hereby amended.
4.2 Borrower acknowledges that the indebtedness evidenced by the
Revolving Note is just and owing, that the balance thereof is correctly shown in
the records of Lender as of the date hereof, and Borrower agrees to pay the
indebtedness evidenced by the Revolving Note according to the terms thereof, as
herein modified.
4.3 Borrower hereby reaffirms to Lender each of the representations,
warranties, covenants and agreements of Borrower set forth in the Revolving Note
and the Loan Agreement, with the same force and effect as if each were
separately stated herein and made as of the date hereof.
4.4 Borrower hereby ratifies, reaffirms, acknowledges, and agrees that
the Revolving Note and the Loan Agreement, represent valid, enforceable and
collectible obligations of Borrower, and that there are no existing claims,
defenses, personal or otherwise, or rights of setoff whatsoever with respect to
any of these documents or instruments. In addition, Borrower hereby expressly
waives, releases and absolutely and forever discharges Lender and its present
and former shareholders, directors, officers, employees and agents, and their
separate and respective heirs, personal representatives, successors and assigns,
from any and all liabilities, claims, demands, damages, action and causes of
action, whether known or unknown and whether contingent or matured, that
Borrower may now have,
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or has had prior to the date hereof, or that may hereafter arise with respect to
acts, omissions or events occurring prior to the date hereof and, without
limiting the generality of the foregoing, from any and all liabilities, claims,
demands, damages, actions and causes of action, known or unknown, contingent or
matured, arising out of, or in any way connected with, the RLC. Borrower further
acknowledges and represents that no event has occurred and no condition exists
that, after notice or lapse of time, or both, would constitute a default under
this Agreement, the Revolving Note or the Loan Agreement.
4.5 All terms, conditions and provisions of the Revolving Note and the
Loan Agreement are continued in full force and effect and shall remain
unaffected and unchanged except as specifically amended hereby. The Revolving
Note and the Loan Agreement, as amended hereby, are hereby ratified and
reaffirmed by Borrower, and Borrower specifically acknowledges the validity and
enforceability thereof.
SECTION 5. GENERAL.
5.1 This Agreement in no way acts as a release or relinquishment of
those rights securing payment of the RLC. Such rights are hereby ratified,
confirmed, renewed and extended by Borrower in all respects.
5.2 The modifications contained herein shall not be binding upon Lender
until Lender shall have received all of the following:
(a) An original of this Agreement fully executed by the
Borrower.
(b) Such resolutions or authorizations and such other
documents as Lender may require relating to the existence and good
standing of the Borrower and the authority of any person executing this
Agreement or other documents on behalf of the Borrower.
5.3 Borrower shall execute and deliver such additional documents and do
such other acts as Lender may reasonably require to fully implement the intent
of this Agreement.
5.4 Borrower shall pay all costs and expenses, including, but not
limited to, reasonable attorneys' fees incurred by Lender in connection
herewith, whether or not all of the conditions described in Paragraph 5.2 above
are satisfied. Lender, at its option, but without any obligation to do so, may
advance funds to pay any such costs and expenses that are the obligation of the
Borrower, and all such funds advanced shall bear interest at the highest rate
provided in the Revolving Note and shall be due and payable upon demand.
5.5 Notwithstanding anything to the contrary contained herein or in any
other instrument executed by Borrower or Lender, or in any other action or
conduct undertaken by Borrower or Lender on or before the date hereof, the
agreements, covenants and provisions contained herein shall constitute the only
evidence of Lender's consent to modify the terms and provisions of the Revolving
Note or the Loan Agreement. Accordingly, no express or implied consent to any
further modifications involving any of the matters set forth in this Agreement
or otherwise shall be inferred or implied by Lender's execution of this
Agreement. Further, Lender's execution of this Agreement shall not constitute a
waiver (either express or implied) of the requirement that any further
modification of the RLC or of
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the Revolving Note or the Loan Agreement, shall require the express written
approval of Lender; no such approval (either express or implied) has been given
as of the date hereof.
5.6 Time is hereby declared to be of the essence hereof of the RLC, of
the Revolving Note and of the Loan Agreement, and Lender requires, and Borrower
agrees to, strict performance of each and every covenant, condition, provision
and agreement hereof, of the Revolving Note and the Loan Agreement.
5.7 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
5.8 This Agreement is made for the sole protection and benefit of the
parties hereto, and no other person or entity shall have any right of action
hereon.
5.9 This Agreement shall be governed by and construed according to the
laws of the State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
▇▇▇▇▇ FARGO BANK OF ARIZONA, NATIONAL
ASSOCIATION, formerly known as FIRST
INTERSTATE BANK OF ARIZONA, N.A.
By:____________________________________
Name:__________________________________
Its:___________________________________
LENDER
THREE-FIVE SYSTEMS, INC., a Delaware
corporation
By:____________________________________
Name:__________________________________
Its:___________________________________
BORROWER
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