EXHIBIT 10.53
CREDIT AGREEMENT
THIS AGREEMENT is entered into and made effective as of May 30, 2003,
by and between IDENTIX INCORPORATED, a Delaware corporation (the "BORROWER"),
and ASSOCIATED BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association (the "BANK"). In consideration of the mutual agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, the Borrower and the
Bank agree as follows:
ARTICLE I.
Definitions
Section 1.01 Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) the words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The words
"hereof," "herein," "hereunder," and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision
of this Agreement; and
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"ADVANCE" means an advance of credit by the Bank to the
Borrower in the form of a loan pursuant to Section 2.01.
"AFFILIATE" means, with respect to a given Person, any other
person or entity controlled by, controlling or under common control
with the subject Person. For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"BANK" has the meaning specified above.
"BORROWER" has the meaning specified above.
"BORROWING BASE" means the sum of 80% of Eligible Accounts
Receivable.
"BORROWING BASE CERTIFICATE" means the certificate attached
hereto as Exhibit A.
"CASH COLLATERAL BALANCE" means the available collected
balance of all funds deposited by the Borrower in the Cash Collateral
Account and subject to a first assignment and security interest in
favor of the Bank.
"CASH COLLATERAL ACCOUNT" means the cash collateral account
established by the Borrower with the Bank and subject to the control of
the Bank in accordance with the terms of the Deposit Account
Assignment.
"CERTIFICATE OF INDEBTEDNESS AND LIENS" means the certificate
attached hereto as Exhibit B.
"COVENANT COMPLIANCE CERTIFICATE" means the certificate
attached hereto as Exhibit C.
"CREDIT DOCUMENTS" means this Agreement, the Revolving Note,
the Deposit Account Assignment, the Security Agreement and all related
financing statements, as such documents may be amended, supplemented,
restated or replaced from time to time.
"DEBT" means the sum of (i) all items of indebtedness or
liability of the Borrower and its Subsidiaries which in accordance with
GAAP would be included in determining total liabilities as shown on the
liabilities side of a balance sheet on the date as of which Debt is to
be determined, plus (ii) indebtedness secured by any mortgage, deed of
trust, assignment, security interest or other lien on property of the
Borrower or its Subsidiaries whether or not the indebtedness secured
thereby shall have been assumed, plus (iii) guaranties, endorsements
(other than for purposes of collection in the ordinary course of
business) and other contingent obligations of the Borrower and its
subsidiaries in respect of or to purchase or otherwise acquire
indebtedness of others.
"DEBT SERVICE COVERAGE RATIO" for any fiscal year of the
Borrower means the ratio of (a) the Borrower's and its Subsidiaries'
consolidated net income plus interest expenses plus depreciation and
amortization expenses minus dividends for such fiscal year, to (b) the
Borrower's and its Subsidiaries' aggregate consolidated amount of
current maturities of long term debt plus interest expense payable by
the Borrower and its Subsidiaries in such fiscal year on all Debt.
"DEBT TO TANGIBLE NET WORTH RATIO" has the meaning specified
in Section 5.09.
"DEPOSIT ACCOUNT ASSIGNMENT" has the meaning specified in
Section 3.01.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ELIGIBLE ACCOUNTS RECEIVABLE" means the aggregate of all
accounts receivable of the Borrower and its Subsidiaries that satisfy
the following conditions: (a) are due and payable within sixty (60)
days; (b) have been outstanding less than one hundred twenty (120) days
past the original date of invoice; (c) have arisen in the ordinary
course of business from services performed by the Borrower and its
Subsidiaries to or for the account debtor or the sale by the Borrower
and its Subsidiaries of goods in which the Borrower and its
Subsidiaries had sole ownership where such goods have been shipped or
delivered to the account debtor, including without limitation, progress
payments; (d) represent complete bona fide transactions which require
no further act under any circumstances on the part of the Borrower or
its Subsidiaries to make such accounts receivable payable by the
account debtor; (e) the goods the sale of which gave rise to such
accounts receivable were shipped or delivered to the account debtor on
an absolute sale basis and not on consignment, a sale or return basis,
a guaranteed sale basis, a ▇▇▇▇ and hold basis, or on the basis of any
similar
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understanding; (f) the goods the sale of which gave rise to such
accounts receivable were not, at the time of sale thereof, subject to
any lien, except the security interest in favor of the Bank created by
the Credit Documents; (g) are not subject to any provisions prohibiting
assignment or requiring notice of or consent to such assignment; (h)
are subject to a perfected, first priority security interest in favor
of the Bank and are not subject to any other lien; (i) are not subject
to setoff, counterclaim, defense, allowance, dispute, or adjustment
other than normal discounts for prompt payment, and the goods for sale
which gave rise to such accounts receivable have not been returned,
rejected, repossessed, lost or damaged; (j) the account debtor is not
insolvent or the subject of any bankruptcy or insolvency proceeding and
has not made an assignment for the benefit of creditors, suspended
normal business operations, dissolved, liquidated, terminated its
existence, ceased to pay its debts as they become due, or suffered a
receiver or trustee to be appointed for any of its assets or affairs;
(k) are not evidenced by chattel paper or any instrument of any kind;
(l) are owed by a Person or Persons that are citizens of or organized
under the laws of the United States or any State and are not owed by
any Person organized under the laws of a jurisdiction located outside
of the United States of America ("FOREIGN PERSONS"), provided that
accounts receivable owed by Foreign Persons may constitute Eligible
Accounts Receivable if (i) payment of such accounts receivable is
insured by a foreign risk insurance policy acceptable to the Bank and
the proceeds of such policy have been assigned to the Bank by an
instrument satisfactory to the Bank, (ii) payment of such accounts
receivable is covered by a letter of credit in form and substance
satisfactory to the Bank, issued by a financial institution
satisfactory to the Bank, and the proceeds of such letter of credit
have been assigned to Bank by an instrument satisfactory to the Bank,
or (iii) Bank specifically approves such accounts receivable as
Eligible Accounts Receivable; (m) if any accounts receivable are owed
by the United States of America or any department, agency, or
instrumentality thereof, the Federal Assignment of Claims Act shall
have been complied with; and (n) are not owed by an Affiliate of the
Borrower. No account receivable owed by an account debtor to the
Borrower and its Subsidiaries shall be included as an Eligible Account
Receivable if more than ten percent (10%) of the balances then
outstanding on accounts receivable owed by such account debtor and its
Affiliates to the Borrower and its Subsidiaries have remained unpaid
for more than one hundred nineteen (119) days from the dates of their
original invoices. The amount of any Eligible Account Receivable owed
by an account debtor to the Borrower and its Subsidiaries shall be
reduced by the amount of all "contra accounts" and other obligations
owed by the Borrower and its Subsidiaries to such account debtor.
"ENVIRONMENTAL LAWS" means all federal, state, local and
foreign laws, statutes, codes, ordinances, regulations, requirements,
rules and common law relating in any way to any hazardous or toxic
materials or the protection of the environment.
"EVENT OF DEFAULT" means any of the events specified in
Section 8.01, and following the implementation of the Borrowing Base,
the additional events specified in Section 8.02.
"GAAP" means generally accepted accounting principles
consistently applied. Except as otherwise approved by the Bank in
writing, all financial reporting, financial record keeping, and
financial calculations in connection with this Agreement shall be made
on the basis of accounting principles, methods, elections and estimates
that are consistent with GAAP and that are consistent with the
accounting principles, methods, elections and estimates used in the
financial statements described in Section 4.04, and that fairly present
the financial condition or results of operations for the period then
ended.
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"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any agency, authority,
instrumentality, regulatory body, court, administrative tribunal,
central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of
or pertaining to government.
"LETTER OF CREDIT" has the meaning specified in Section 2.04.
"LINE OF CREDIT" has the meaning specified in Section 2.01.
"MATERIAL ADVERSE EFFECT" means a material adverse change in,
or material adverse effect upon, the business, property or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole on a consolidated basis.
"OBLIGATIONS" means any and all liabilities, whether
contingent or non-contingent, of the Borrower or its Subsidiaries to
the Bank under or with respect to the Credit Documents, whether now
existing or arising at any time hereafter.
"PERSON" means any natural person, corporation, limited
liability company, trust, joint venture, association, company,
partnership, Governmental Authority or other entity.
"PLAN" has the meaning specified in Section 4.10.
"PROHIBITED TRANSACTION" has the meaning assigned to that term
in ERISA.
"REPORTABLE EVENT" has the meaning assigned to that term in
ERISA.
"REVOLVING NOTE" has the meaning specified in Section 2.01.
"SECURITY AGREEMENT" has the meaning specified in Section
7.01.
"SUBSIDIARIES" means any direct or indirect wholly owned
subsidiary entity of the Borrower. The existing Subsidiaries of the
Borrower are identified on Exhibit D.
"TANGIBLE NET WORTH" means the difference of:
(a) the tangible assets of the Borrower and its Subsidiaries
which, in accordance with GAAP, are tangible assets, after deducting
adequate reserves in each case where, in accordance with GAAP, a
reserve is proper, minus
(b) all Debt of the Borrower and its Subsidiaries; provided,
that (i) inventory shall be taken into account on the basis of the cost
or current market value, whichever is lower, (ii) in no such event
shall there be included as such tangible assets patents, trademarks,
tradenames, copyrights, licenses, good will, memberships, prepaid
expenses, deferred charges or treasury stock
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or any securities or debt of the Borrower and its Subsidiaries, or any
receivables due to the Borrower or its Subsidiaries from or investments
of the Borrower or its Subsidiaries in any Affiliate of the Borrower or
its Subsidiaries, or any other debt or securities unless the same are
readily marketable in the United States of America, (iii) securities
included as such tangible assets shall be taken into account in
accordance with GAAP, and (iv) any write-up in the book value of any
assets shall not be taken into account.
ARTICLE II.
Amount and Terms of Advances
Section 2.01 Advances. Subject to the provisions of this Agreement, the
Borrower may obtain Advances, prepay, and obtain new Advances under this Section
2.01, and the Bank shall make such Advances to the Borrower from time to time
during the period from the date hereof to October 30, 2004 or the earlier date
of termination of the Line of Credit pursuant to Section 8.03, in an aggregate
maximum amount up to but not in excess of the Line of Credit. As used in this
Agreement, the term "LINE OF CREDIT" means the lesser of (a) $15,000,000.00, or
(b)(i) the Cash Collateral Balance or (ii) the Borrowing Base when the Borrowing
Base becomes effective under Article VII of this Agreement. The obligation to
repay the Advances and to pay interest and other charges, fees and expenses
thereon is evidenced by the Borrower's $15,000,000.00 Promissory Note dated the
date hereof payable to the order of the Bank (together with any amendments,
extensions, renewals and replacements thereof, called the "REVOLVING NOTE"). If
at any time the unpaid principal balance of the Revolving Note exceeds the Cash
Collateral Balance or the Borrowing Base, as applicable, the Borrower shall
immediately upon demand of the Bank make a mandatory principal payment on the
Revolving Note in an amount sufficient to bring the Borrower into compliance
with this Section 2.01. The Borrower shall use all proceeds of the Advances
solely for working capital of the Borrower. No proceeds of any Advance shall be
used to purchase any stock of the Borrower, any Subsidiary, or any Affiliate of
the Borrower or any Subsidiary.
Section 2.02 Making the Advances. Each Advance shall be made on prior
written request from the Borrower to the Bank or prior telephonic request to the
Bank from the Borrower to the Bank made by any person purporting to be
authorized to request Advances on behalf of the Borrower, which request shall
specify the date of the requested Advance and the amount thereof and which
request shall be received by the Bank no later than 3:00 p.m. (Central Time) on
of the day on which the Advance is to be made. Upon fulfillment of the terms and
conditions of this Agreement, the Bank shall disburse the amount of any
requested Advance by crediting the same to the Borrower's checking account at
the Bank or in such other manner as the Bank and the Borrower may from time to
time agree. The Borrower shall be obligated to repay all Advances
notwithstanding the fact that the person requesting the same was not authorized
to do so, provided the Bank had a reasonable good faith basis to believe the
person requesting the Advance had the authority to do so. Any request for an
Advance shall be deemed to be a representation that the statements set forth in
Sections 3.02(a) and 3.02(b) are correct as of the date of such request.
Section 2.03 Payment, Balance and Setoff. All payments of principal,
interest and other charges, fees and expenses under the Revolving Note and this
Agreement shall be made to the Bank in immediately available funds. The Borrower
agrees that the amount shown on the books and records of the Bank as being the
unpaid balance of principal, accrued interest and other charges, fees and
expenses under the Revolving Note and this Agreement shall be prima facie
evidence thereof. The Borrower hereby irrevocably authorizes the Bank, if and to
the extent payment is not promptly made pursuant hereto, to charge against
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any amount owing by the Bank to the Borrower, an amount equal to the principal,
accrued interest and other charges, fees and expenses then due. In addition, the
Borrower hereby irrevocably authorizes the Bank to collect interest and other
charges, fees and expenses under the Revolving Note and this Agreement when due
from time to time by charging the Borrower's checking account at the Bank. The
Bank agrees to promptly notify the Borrower following the exercise of its rights
under this Section 2.03 but the failure to give such notice shall not affect the
validity of such action or the application of any funds to the payment of the
Obligations under this Section 2.03.
Section 2.04 Letters of Credit. The Bank may in its discretion issue
one or more letters of credit as directed by the Borrower (collectively, the
"LETTER OF CREDIT"). In such case, the issuance of the Letter of Credit shall be
treated as an Advance of the Line of Credit and the Line of Credit availability
under this Agreement shall be restricted by the face amount of the Letter of
Credit outstanding from time to time. The Borrower agrees that any amounts
advanced by the Bank under any such Letter of Credit shall be a mandatory
Advance of the Line of Credit without any request or approval of the Borrower.
The obligations of the Borrower to pay advances made on the Letter of Credit
shall be unconditional and irrevocable, and shall be paid strictly in accordance
with the terms of the Revolving Note and this Agreement under all circumstances,
including, without limitation, the following circumstances: (a) the existence of
any claim, setoff, defense or other right which the Borrower may have at any
time against the holder of any beneficiary or transferee of the Letter of Credit
(or any persons or entities for whom such beneficiary or any such transferee may
be acting), the Bank or any other person or entity, whether in connection with
this Agreement, the transactions contemplated herein or in the Credit Documents;
(b) any statement or any other document presented under the Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; (c) payment by the
Bank under the Letter of Credit against presentation of a draft or certificate
which does not comply with the terms of the Letter of Credit, except in the
event of the Bank's willful misconduct or gross negligence in determining
whether documents presented under the Letter of Credit comply with the terms of
the Letter of Credit. Any such Letter of Credit shall be in form and substance
acceptable to the Bank and shall have an expiration date of not later than
October 30, 2004, unless the Letter of Credit is fully secured by cash
collateral on deposit with the Bank in the Cash Collateral Account in which case
the expiration date of the Letter of Credit may be later than October 30, 2004.
The Bank shall not be obligated to release the collateral subject to the Deposit
Account Assignment and the Security Agreement until the Letter of Credit has
expired and all amounts owing to the Bank under the Revolving Credit Note,
including amounts, if any, advanced under the Letter of Credit have been paid in
full. If any change in any law or regulation or in the interpretation thereof by
any court or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against letters of credit issued
by, or assets held by, or deposits in or for the account of, the Bank or (ii)
impose on the Bank any other condition regarding the Letter of Credit, and the
result of any event referred to in the preceding clause (i) or (ii) shall be to
increase the cost to the Bank of issuing or maintaining the Letter of Credit
(which increase in cost shall be determined by the Bank's reasonable allocation
of the aggregate of such cost increases resulting from such event), then, upon
demand by the Bank, the Borrower shall immediately pay to the Bank, from time to
time as specified by the Bank, additional amounts which shall be sufficient to
compensate the Bank for such increased cost.
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ARTICLE III.
Conditions
Section 3.01 Required Documents. The initial Advance shall be subject
to the condition precedent that the Bank shall have received prior thereto all
of the following, in form and substance acceptable to the Bank:
(a) The Revolving Note, properly executed by the Borrower.
(b) A Deposit Account Assignment and Security Agreement (the
"DEPOSIT ACCOUNT ASSIGNMENT"), properly executed by the Borrower,
granting to the Bank a first perfected security interest in the Cash
Collateral Account, and all amounts now or at any time hereafter on
deposit therein, and all interest and other earnings which may now or
hereafter accrue thereon, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and all proceeds of the
foregoing property.
(c) A certificate of authority of the Borrower. The Bank may
conclusively rely on such certificate until it shall receive a further
certificate of authority of the Borrower, in form and substance
acceptable to the Bank, canceling or amending the prior certificate.
(d) A certificate of good standing of the Borrower, issued by
the Delaware Secretary of State.
(e) The Certificate of Indebtedness and Liens, properly
completed and executed by the chief financial officer of the Borrower.
(f) An opinion of legal counsel for the Borrower.
(g) Payment to the Bank of a one time origination fee in the
amount of $18,000.00.
(h) Payment of the Bank's attorneys' fees and legal expenses,
and other out-of-pocket expenses of the Bank incurred, in connection
with the drafting of this Credit Agreement, the Note, the Deposit
Account Assignment and closing the Loan, not to exceed $10,000.00.
Section 3.02 Other Conditions. Each Advance shall be subject to the
further conditions precedent that:
(a) The representations and warranties contained of the
Borrower contained in Article IV of this Agreement, and when the
Borrowing Base is in effect (except during times when there is no
amount outstanding on the Note other than amounts which will be due as
a result of a draw on a Letter of Credit which is fully collateralized
with cash collateral on deposit with the Bank in the Cash Collateral
Account) the representations contained in Article VII of this
Agreement, are correct as of the date of such Advance as though made as
of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
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(b) No event has occurred, or would result from such Advance,
which constitutes an Event of Default or would constitute an Event of
Default with notice or passage of time or both.
(c) Until the Borrowing Base is implemented in accordance with
Article VII of this Agreement, collected unrestricted funds of the
Borrower (and not funds of a Subsidiary) are deposited by the Borrower
into the Cash Collateral Account equal to the sum of the aggregate
outstanding principal amount of all prior Advances plus any portion of
the Line of Credit reserved to support unexpired Letters of Credits
plus the amount of the requested Advance. The Borrower shall provide to
the Bank at the time of each deposit into the Cash Collateral Account a
certificate executed by the chief financial officer or corporate
controller of the Borrower certifying to the Bank that the funds then
being deposited into the Cash Collateral Account are the collected
unrestricted funds of the Borrower (and not funds of a Subsidiary).
(d) Each Advance requested during any time that the Borrowing
Base is in effect in accordance with Article VII of this Agreement
(except during times when there is no amount outstanding on the Note
other than amounts which will be due as a result of a draw of a Letters
of Credit which is fully collateralized by cash collateral on deposit
with the Bank in the Cash Collateral Account), shall be subject to the
following additional conditions precedent:
(i) The Bank shall have received all Borrowing Base
Certificates required to be delivered by the
Borrower;
(ii) The Bank shall have received a Covenant
Compliance Certificate for the fiscal quarter of
the Borrower most currently ending and for which
a Covenant Compliance Certificate is due in
accordance with Section 5.01(f) of this
Agreement; and
(iii) The most recent Borrowing Base Certificate
shows, to the satisfaction of the Bank, that the
sum of the aggregate outstanding principal
amount of all prior Advances plus any amount of
the Line of Credit reserved to support unexpired
Letters of Credits plus the amount of the
requested Advance does not exceed the Borrowing
Base.
ARTICLE IV.
Representations and Warranties
The Borrower represents and warrants to the Bank as follows:
Section 4.01 Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary except where the Borrower's failure to so license or
qualify does not cause a Material Adverse Effect, and has all requisite power
and authority to own its property and carry on its business. The Borrower has
all requisite power and authority to execute and deliver and to perform all of
its obligations under the Credit Documents.
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Section 4.02 Authorization. The execution, delivery and performance by
the Borrower of the Credit Documents have been duly authorized by all requisite
action and do and will not (a) require any consent or approval of any person or
entity or governmental authority, (b) violate any law, rule, regulation, order,
writ, injunction or decree, or the articles, bylaws, or shareholder control
agreement of the Borrower, (c) result in a breach of or constitute a default
under any contract, agreement or other writing to which the Borrower is a party
or by which the Borrower or any property of the Borrower may be bound or
affected, or (d) result in, or require the creation or imposition of, any
mortgage, deed of trust, assignment, security interest or other lien, interest,
encumbrance, claim or charge of any nature, except in favor of the Bank, upon or
with respect to any property of the Borrower.
Section 4.03 Legal Agreements. The Credit Documents constitute the
legal, valid and binding obligations of the Borrower, enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency and similar laws,
statutes of limitation and principles of equity.
Section 4.04 Financial Statements. The Borrower has provided or has
made available through public filing the following financial statements to the
Bank: annual audited fiscal year end financial statements of the Borrower as of
June 30, 2002, and quarterly interim financial statements of the Borrower as of
March 31, 2003. Said statements, including all schedules and notes pertaining
thereto, were prepared in accordance with GAAP, and fully and fairly present the
financial condition of the Borrower on the dates thereof and the results of its
operations for the periods covered thereby; provided however, the quarterly
statements are subject to customary year end adjustments in the annual financial
statement for such fiscal year which in the aggregate do not cause a Material
Adverse Effect.
Section 4.05 No Adverse Change. There has been no material adverse
change in the business, property or condition (financial or otherwise) of the
Borrower since the date of the latest financial statement referred to in
Sections 4.04 and 5.01.
Section 4.06 Titles and Liens. The Borrower has good title to all of
the property reflected in the latest balance sheet referred to in Sections 4.04
and 5.01, free and clear of all mortgages, deeds of trust, assignments, security
interests and other liens, interests, encumbrances, claims and charges, except
for liens permitted by Section 6.01 and covenants, restrictions, rights,
easements and minor irregularities in title which do not materially interfere
with the business or operations of the Borrower.
Section 4.07 Taxes. The Borrower has filed all required tax returns,
has paid all due and payable taxes, assessments and other governmental charges
levied or imposed upon it or upon its income or profits or upon any of its
property, and has made adequate provision for the payment of such taxes,
assessments and other charges accruing but not yet due and payable; except for
those being contested in good faith and for which adequate reserves have been
established or those that do no otherwise cause a Material Adverse Effect.
Section 4.08 Litigation. There is no pending or threatened notice,
claim, litigation, proceeding or investigation against or affecting the Borrower
or any property of the Borrower, whether or not covered by insurance, that would
cause a Material Adverse Effect, and there is no basis for any such order,
notice, claim, litigation, proceeding or investigation.
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Section 4.09 Margin Stock. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
Section 4.10 Employee Benefit Plans. No Reportable Event or Prohibited
Transaction has occurred with respect to any employee benefit plan or other plan
maintained for employees of the Borrower ("PLAN"). Each Plan is in compliance
with all applicable requirements of ERISA and all applicable rulings and
regulations thereunder.
Section 4.11 No Stock or Securities. The Borrower owns no shares of
stock or securities of any Person other than stock of the Subsidiaries and
except as set forth in Exhibit D.
Section 4.12 Environmental Matters.
(a) The Borrower is not in violation of any Environmental Law
which would cause a Material Adverse Effect; and
(b) No disposal or release of any hazardous or toxic material
has occurred on, from or under any property owned, operated or
controlled by the Borrower which would cause a Material Adverse Effect
(as to property leased by the Borrower as lessee, this representation
is to the Borrower's knowledge only); and
(c) There has been no treatment, manufacturing, refining,
handling or storage of any hazardous or toxic material at any property
owned, operated or controlled by the Borrower, which could cause a
Material Adverse Effect (as to property leased by the Borrower as
lessee, this representation is to Borrower's knowledge only); and
(d) No litigation, investigation or administrative action has
been commenced or is pending or threatened, nor has any settlement been
reached with any public or private party or parties, or any order
issued, relating in any way to any alleged or actual presence, disposal
or release of any hazardous or toxic material or any violation of any
Environmental Law with respect to any property owned, operated or
controlled by the Borrower which could cause a Material Adverse Effect
(as to property leased by the Borrower as lessee, this representation
is to Borrower's knowledge only); and
(e) To the Borrower's knowledge, all tenants of the Borrower
have filed all notices and permit applications required to be filed
under the Environmental Laws with respect to their businesses, property
and operations; and
(f) The Borrower has no known material contingent liability
with respect to its business, property or operations as now or
previously owned, operated, controlled or conducted by the Borrower in
connection with any hazardous or toxic material or any Environmental
Law which could cause a Material Adverse Effect.
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ARTICLE V.
Affirmative Covenants
So long as any Obligation shall remain outstanding, the Borrower shall
comply with the following requirements:
Section 5.01 Financial Statements and Other Information. The Borrower
shall deliver to the Bank, in form and substance acceptable to the Bank:
(a) As soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Borrower (beginning with
the fiscal year ending June 30, 2003), a copy of the annual audited
consolidated financial statements of the Borrower and its Subsidiaries
prepared by independent certified public accountants selected by the
Borrower and acceptable to the Bank, which report shall include the
consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year, and the related statements of income, cash
flows and stockholders' equity of the Borrower and its Subsidiaries for
such fiscal year, including all supporting schedules and notes, all in
reasonable detail, prepared in accordance with GAAP.
(b) As soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of the Borrower, the
interim consolidated reviewed financial statement of the Borrower and
its Subsidiaries reviewed by independent certified accountants selected
by the Borrower and acceptable to the Bank, including a consolidated
balance sheet, statements of income and cash flows of the Borrower and
its Subsidiaries for such quarter and for year to date, including all
supporting schedules and notes, all in reasonable detail, prepared in
accordance with GAAP, subject however, to year-end audit adjustments.
(c) As soon as available and in any event within forty-five
(45) days after the end of each calendar month, "draft" internally
prepared confidential consolidated month end financial statement of the
Borrower and its Subsidiaries without any representation as to accuracy
or completeness, including a consolidated balance sheet and a
consolidated income statement of the Borrower and its Subsidiaries.
(d) Promptly after sending, making available or filing the
same, copies of all other financial statements, reports, proxy
statements, registration statements and other communications which the
Borrower or its Subsidiaries sends or makes available to its
stockholders or files with any securities exchange.
(e) Within 10 days after the Bank's request therefor, such
other information respecting the condition (financial or otherwise),
business and property of the Borrower or its Subsidiaries as the Bank
may from time to time reasonably request.
(f) As promptly as practicable (but in any event not later
than five (5) days after Borrower's chief executive officer, chief
financial officer, corporate controller or any other executive officer
obtains knowledge of the occurrence of any event which constitutes an
Event of Default or would constitute an Event of Default with notice or
passage of time or both), written notice of such occurrence, together
with a detailed statement by a responsible officer of the Borrower of
the steps being taken to cure the effect of such event.
11
(g) During any time that the Borrowing Base is in effect in
accordance with Article VII of this Agreement (except during times when
there is no amount outstanding on the Note other than amounts which
will be due as a result of a draw on a Letter of Credit which is fully
collateralized with cash collateral on deposit with the Bank in the
Cash Collateral Account), the Borrower shall also deliver to the Bank:
(i) As soon as available and in any event within
thirty (30) days after the end of each month, a
Borrowing Base Certificate with amounts
determined as of the end of such month and
executed by the chief financial officer or
corporate controller of the Borrower;
(ii) As soon as available and in any event within
thirty (30) days after the end of each month,
the listing and aging of accounts receivable of
the Borrower and a report of work in process of
the Borrower, all as the end of such month,
including all supporting schedules and notes,
all in reasonable detail, prepared by the chief
financial officer of the Borrower in accordance
with GAAP, executed by the chief financial
officer or corporate controller of the Borrower;
and
(iii) As soon as available and in any event within
forty-five (45) days after the end of each
fiscal quarter of the Borrower, a Covenant
Compliance Certificate with calculations
determined as of each fiscal quarter end for the
Debt to Tangible Net Worth Ratio and as of each
fiscal year end of the Borrower for the Debt
Service Coverage Ratio, executed by the chief
financial officer or corporate controller of the
Borrower.
Section 5.02 Books and Records. The Borrower shall keep accurate books
and records in which true and complete entries will be made in accordance with
GAAP. Upon reasonable request of the Bank, the Borrower, during normal business
hours, shall give any representatives of the Bank access to and permit such
representatives to examine and copy all books, records and other writings in its
possession, to inspect its property and to discuss its finances, accounts,
property and business with any of its officers and directors.
Section 5.03 Taxes and Other Claims. The Borrower shall file when due
all required tax returns, shall pay when due all taxes, assessments and other
governmental charges levied or imposed upon the Borrower or upon the Borrower's
income or profits or upon any of the Borrower's property, and shall pay when due
all lawful claims for labor, materials and supplies which, if unpaid, might
become a lien or charge upon any property of the Borrower; provided, that the
Borrower shall not be required to pay any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings, and for which the Borrower has set aside adequate
reserves for the payment thereof.
12
Section 5.04 Maintenance of Properties. The Borrower shall keep and
maintain the Borrower's inventory, equipment, real estate and other property
necessary or useful in the Borrower's business in good condition and repair and
shall pay when due all rental and mortgage payments due on such property;
provided, that nothing in this Section shall prevent the Borrower from
discontinuing the operation and maintenance of any such property if such
discontinuance is desirable in the conduct of the Borrower's business which
would not cause a Material Adverse Effect.
Section 5.05 Insurance. The Borrower shall obtain and maintain
insurance with insurers that are reasonably acceptable to the Bank, in such
amounts and with such coverages (including without limitation liability
insurance, fire, hazard and extended coverage insurance on all of the Borrower's
assets, necessary workers' compensation insurance and all other coverages as are
consistent with industry practice) as are reasonably acceptable to the Bank. In
the event the Borrower fails to pay any premium on any such insurance, the Bank
may do so, and the Borrower shall reimburse the Bank for any such payment on
demand.
Section 5.06 Corporate Existence. The Borrower shall preserve and
maintain its corporate existence and all of the Borrower's corporate rights,
privileges and franchises.
Section 5.07 Compliance with Laws. The Borrower shall comply with all
applicable laws and regulations except where the failure to do so would not
cause a Material Adverse Effect.
Selection 5.08 Accounts. The Borrower shall maintain its primary
operating account with the Bank.
Section 5.09 Operating Covenants. During any time that the Borrowing
Base is in effect in accordance with Article VII of this Agreement (except
during times when there is no amount outstanding on the Note other than amounts
which will be due as a result of a draw on a Letter of Credit which is fully
collateralized by cash collateral on deposit with the Bank in the Cash
Collateral Account), the following operating covenants shall be in effect:
(a) As of the end of each fiscal quarter of the Borrower, the
Borrower shall not permit the ratio of the Borrower's Debt to Tangible
Net Worth to exceed 1.0 to 1.0 (the "DEBT TO TANGIBLE NET WORTH
RATIO").
(b) As of the end of each fiscal year of the Borrower, the
Borrower shall not permit the Borrower's Debt Service Coverage Ratio to
be less than 1.25 to 1.
(c) The Borrower shall maintain a quarterly profit of at least
$1.00 before taxes.
13
ARTICLE VI.
Negative Covenants
The Borrower shall not do any of the following without the prior
written consent of the Bank, which consent shall not be unreasonably withheld.
The following negative covenants shall only be in effect during the time that
the Borrowing Base is in effect in accordance with Article VII of this Credit
Agreement (but not during times when there is no amount outstanding on the Note
other than amounts which will be due as a result of a draw on a Letter of Credit
which is fully collateralized by cash collateral on deposit with the Bank in the
cash collateral Account):
Section 6.01 Liens on General Business Assets. The Borrower shall not
create, incur or permit to exist in favor of any Person other than the Bank any
mortgage, deed of trust, assignment, security interest or other lien on any of
its property now owned or hereafter acquired, except: (a) purchase money
security interests in equipment of the Borrower, (b) other mortgages, deeds of
trust, assignments, security interests and other liens in existence on the date
of the implementation of the Borrowing Base in accordance with Article VII of
this Credit Agreement and listed on the updated Certificate of Indebtedness and
Liens to be delivered to the Bank under Article VII of this Credit Agreement,
and (c) liens that are being contested in good faith and for which adequate
reserves have been established.
Section 6.02 Sale of Assets. The Borrower shall not sell, lease,
assign, transfer or otherwise dispose of all or a substantial part of its assets
(whether in one or more transactions).
Section 6.03 Corporate Structure. The Borrower shall not consolidate
with or merge into any other person or entity, or permit any other person or
entity to merge into the Borrower, or acquire all or a substantial part of the
assets of any other person or entity, except where the Borrower is the surviving
entity by merger or consolidation and no change of control has occurred.
Section 6.04 Nature of Business. The Borrower shall not engage in any
line of business materially different from that presently engaged in by the
Borrower.
Section 6.05 Investments. The Borrower shall not purchase or hold
beneficially any shares of stock or other securities or evidences of
indebtedness of any other Person, make or permit to exist any loans or advances
to any other Person, or make any investment or acquire any interest whatsoever
in any other Person or entity, except:
(a) Deposits in the Bank;
(b) Other deposits which are fully insured by the Federal
Deposit Insurance Corporation;
(c) Repurchase agreements with the Bank;
(d) Commercial paper issued by corporations incorporated in
the United States of America, rated "A-1" by Standard & Poors
Corporation or "Prime-1" by ▇▇▇▇▇'▇ Investors Service, Inc.;
14
(e) Shares of money market mutual funds incorporated or
organized in the United States of America;
(f) Obligations of, or guaranteed by, the United States
Government or any agency thereof;
(g) Business-related advances to officers, managers and
employees of the Borrower for travel relating to the Borrower's
business;
(h) Advances in the form of progress payments, prepaid rent or
security deposits; and
(i) Stock or indebtedness of its Subsidiaries, including the
Subsidiaries listed on Exhibit D.
(j) Existing obligations to make loans set forth in Exhibit E.
ARTICLE VII.
Implementation of Borrowing Base
Section 7.01 Implementation of Borrowing Base. Subject to the
fulfillment of each condition precedent set forth in this Article VII to the
satisfaction of the Bank, the Bank will implement the Borrowing Base to support
Advances of the Line of Credit in lieu of the Borrower providing Cash Collateral
to support Advances of the Line of Credit:
(a) The Borrower establishes a net profit before taxes in two
(2) consecutive fiscal quarters.
(b) The Borrower establishes a Debt to Tangible Net Worth
Ratio of not more than 1.0 to 1.0.
(c) The Bank has completed a satisfactory collateral audit of
the Borrower and its Subsidiaries and the Borrower's assets and the
assets of the Borrower's Subsidiaries. The Borrower agrees to pay or
reimburse the Bank for the reasonable cost of such collateral audit,
not to exceed $2,500.00.
(d) The Borrower and each Subsidiary executes and delivers to
the Bank a Security Agreement in form and content acceptable to the
Bank (collectively, the "SECURITY AGREEMENT"), granting to the Bank a
first perfected security interest in the following:
(i) All inventory of the Borrower and its
Subsidiaries, and all returns of such inventory,
and all warehouse receipts, bills of lading and
other documents covering such inventory, whether
now existing or hereafter arising, whether now
owned or hereafter acquired;
15
(ii) All equipment of the Borrower and its
Subsidiaries, together with all accessions,
accessories, attachments, fittings, increases,
parts, repairs, returns, renewals and
substitutions of all or any part thereof, and
all warehouse receipts, bills of lading and
other documents covering such equipment, whether
now existing or hereafter arising, whether now
owned or hereafter acquired;
(iii) All accounts of the Borrower and its
Subsidiaries (including but not limited to all
health-care-insurance receivables), instruments,
chattel paper, investment property,
letter-of-credit rights, letters of credit,
other rights to payment, documents, deposit
accounts, money, patents, patent applications,
trademarks, trademark applications, copyrights,
copyright applications, trade names, other
names, software, including all embedded
software, payment intangibles, and other general
intangibles of the Borrower and its
Subsidiaries, together with all good will
related to the foregoing property and all
rights, liens, security interests and other
interests which the Borrower and its
Subsidiaries may at any time have by law or
agreement against any account, issuer or obligor
obligated to make any such payment or against
any of the property of such account debtor,
issuer, or obligor, and all supporting
obligations relating to the foregoing, whether
now existing or hereafter arising, whether now
owned or hereafter acquired;
(iv) All records and data pertaining to all of the
foregoing property, whether in the form of
writing, photograph, microfilm, microfiche, or
electronic media, together with all of the
Borrower and its Subsidiaries's software,
including embedded software, required to
utilize, create, maintain and process any such
records or data on electronic media; and
(v) All products and proceeds of the foregoing
property, including without limitation all
accounts, instruments, chattel paper, investment
property, letter-of-credit rights, letters of
credit, other rights to payment, documents,
deposit accounts, money, insurance proceeds and
general intangibles related to the foregoing
property, and all refunds of insurance premiums
due or to become due under all insurance
policies covering the foregoing property.
Notwithstanding the foregoing, the Borrower will
not be required to file collateral assignments
of its patents or trademarks with the federal
office of Patents or Trademarks or register any
of its copyrights or software with the U.S.
Copyright office.
(e) The Borrower delivers to the Bank an initial Borrowing
Base Certificate, an initial Covenant Compliance Certificate and an
updated Certificate of Indebtedness and Liens, properly completed and
extended by the chief financial officer or corporate controller of the
Borrower.
(f) All financing statements, termination statements, and
other writings, properly executed, which are deemed by the Bank to be
necessary or desirable to grant the Bank a perfected security interest
constituting a first lien on the property described in Section 7.01(d)
of this Agreement.
16
(g) UCC and state and federal tax lien searches, with respect
to the Borrower and its Subsidiaries, duly certified to a current date
by the appropriate filing officer, from the Secretary of State of
Delaware, the Secretary of State of Minnesota, and each and every other
jurisdiction in which the Borrower and its Subsidiaries have owned
assets in the past five (5) years.
(h) A certificate of insurance covering the tangible property
described in the Section 7.01(d) of this Agreement, in such amounts,
against such risks and in such companies as shall be reasonably
acceptable to the Bank, which certificate shall name the Bank as lender
loss payee and shall provide for at least thirty (30) days' prior
written notice to the Bank of any cancellation or modification of such
insurance, and certificates of all other insurance required by Section
5.05 of this Agreement.
(i) A certificate of authority of the Borrower and each
Subsidiary. The Bank may conclusively rely on such certificate until it
shall receive a further certificate of authority of the Borrower or the
Subsidiary, in form and substance acceptable to the Bank, canceling or
amending the prior certificate.
(j) A current certificate of good standing of the Borrower and
each Subsidiary, issued by the Secretary of State of the State of
organization of the Borrower and each Subsidiary.
(k) An opinion of legal counsel for the Borrower and each
Subsidiary.
(l) Payment of the Bank's attorneys' fees and legal expenses,
and other out-of-pocket expenses of the Bank in drafting the Security
Agreement and closing the implementation of the Borrowing Base, not to
exceed $2,000.00.
Section 7.02 Other Conditions. The implementation of the Borrowing Base
shall be subject to the further conditions precedent that:
(a) The representations and warranties of the Borrower
contained in Article IV are correct as of the date of the
implementation of the Borrowing Base as though made as of such date,
except to the extent that such representations and warranties relate
solely to an earlier date;
(b) Each of the following representations and warranties will
be true and correct for each of the Subsidiaries:
(i) The execution, delivery and performance by each
Subsidiary of the Security Agreement has been
duly authorized by all requisite action and do
and will not (A) require any consent or approval
of any person or entity or governmental
authority, (B) violate any law, rule,
regulation, order, writ, injunction or decree,
or the articles, bylaws, or shareholder control
agreement of the Subsidiary, (C) result in a
breach of or constitute a default under any
contract, agreement or other writing to which
the Subsidiary is a party or by which the
Subsidiary or any property of the Subsidiary may
be bound or affected, or (D) result in, or
require the creation or imposition of, any
mortgage, deed of trust, assignment, security
interest or other lien, interest, encumbrance,
claim or charge of any nature, except in favor
of the Bank, upon or with respect to any
property of the Subsidiary;
17
(ii) The Security Agreement constitutes the legal,
valid and binding obligations of the Subsidiary,
enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency and
similar laws, statutes of limitation and
principles of equity;
(iii) No Material Adverse Effect has occurred since
the date of the latest financial statement
referred to in Sections 4.04 and 5.01; and
(iv) The Subsidiary has good title to all of the
property reflected in the latest balance sheet
referred to in Sections 4.04 and 5.01, free and
clear of all mortgages, deeds of trust,
assignments, security interests and other liens,
interests, encumbrances, claims and charges,
except for liens permitted by Section 6.01 with
respect to the Subsidiary and covenants,
restrictions, rights, easements and minor
irregularities in title which do not materially
interfere with the business or operations of the
Subsidiary.
ARTICLE VIII.
Events of Default, Rights and Remedies
Section 8.01 Events of Default. The occurrence of any of the following
events shall constitute an Event of Default under this Credit Agreement and the
other Credit Documents:
(a) Any default in the payment of any amount due under this
Agreement or the Revolving Note within five (5) days of its due date;
or
(b) Any material statement, representation or warranty of the
Borrower (or any officer, director, employee, agent or attorney of the
Borrower) to the Bank at any time, including without limitation any
statement, representation or warranty made in this Agreement or in any
writing contemplated by this Agreement, shall be incorrect or
misleading in any material respect when made; or
(c) Any non-monetary default in the performance or breach of
any other covenant or agreement of the Borrower in this Agreement, any
writing contemplated by this Agreement, or any other agreement with the
Bank which continues in effect for thirty (30) days after written
notice thereof by the Bank to the Borrower; provided however, a notice
of default does not have to be given by the Borrower under this
Agreement if notice of the same default is being given to the Borrower
under any other writing contemplated by this Agreement or in any other
agreement with the Bank, or if such default is otherwise provided for
in this Section 8.01; or
(d) The Borrower shall be dissolved or become insolvent, make
an assignment for the benefit of creditors, apply for or consent to the
application or suffer the appointment of any receiver, trustee or
similar officer, or initiate or have initiated against it any act,
process or proceeding under any insolvency, bankruptcy, dissolution,
liquidation or similar law; or
18
(e) Any default under any other bond, debenture, note or other
evidence of indebtedness of the Borrower in favor of the Bank, or under
any indenture or other writing under which any such evidence of
indebtedness has been issued or by which it is governed or the
acceleration of payment of any such indebtedness, following the passage
of any applicable grace or cure period; or
(f) Any default under any bond, debenture, note or other
evidence of indebtedness of the Borrower to any party other than the
Bank, or under any indenture or other writing under which any such
evidence of indebtedness has been issued or by which it is governed or
the acceleration of payment of any such indebtedness, following the
passage of any applicable grace or cure period and resulting in a
Material Adverse Effect; or
(g) The Borrower shall suffer a final judgment or other order
for the payment of money in the amount of $10,000,000.00 or more or
which otherwise results in a Material Adverse Effect that is not or is
no longer subject to a stay pending appeal; or
(h) The issuance or levy of any writ, warrant, attachment,
garnishment, execution or similar process against any property of the
Borrower, or the attachment of any tax lien to any property of the
Borrower which has not been stayed; or
(i) The occurrence of any Reportable Event or Prohibited
Transaction with respect to any Plan, or any Plan shall not be in
compliance with all applicable requirements of ERISA and all applicable
rules and regulations thereunder, or any Plan shall terminate, or a
trustee is appointed by any court to administer any Plan, or the
Pension Benefit Guaranty Corporation shall institute any proceeding
with respect to any Plan; or
(j) Any event resulting in a Material Adverse Effect occurs;
or
(k) The Borrower shall fail to be in compliance with any of
the operating covenants specified in Section 5.09 of this Agreement
during any time that such operating covenants are in effect; or
(l) The Borrower fails to timely deliver any financial
statement or certificate required to be delivered to the Bank under
Sections 5.01(a), (b), (c) or (g) of this Agreement within the period
of time allowed for the delivery of the same as provided in this
Agreement.
Section 8.02 Additional Events of Default. Following the implementation
of the Borrowing Base under Article VII of this Agreement, the following shall
be additional Events of Default under this Credit Agreement and all other Credit
Documents:
(a) Any material statement, representation or warranty of a
Subsidiary (or any officer, director, employee, agent or attorney of
such Subsidiary) to the Bank at any time, including without limitation
any statement, representation or warranty made in the Security
Agreement or in any writing contemplated by the Security Agreement,
shall be incorrect or misleading in any material respect when made; or
19
(b) Any Subsidiary shall be dissolved or become insolvent,
make an assignment for the benefit of creditors, apply for or consent
to the application or suffer the appointment of any receiver, trustee
or similar officer, or initiate or have initiated against it any act,
process or proceeding under any insolvency, bankruptcy, dissolution,
liquidation or similar law; provided however, a dissolution of a
Subsidiary into the Borrower or another Subsidiary shall be permitted
and shall not create an Event of Default; or
(c) Any default under any other bond, debenture, note or other
evidence of indebtedness of any Subsidiary in favor of the Bank, or
under any indenture or other writing under which any such evidence of
indebtedness has been issued or by which it is governed or the
acceleration of payment of any such indebtedness following the passage
of any applicable grace or cure period; or
(d) Any default under any bond, debenture, note or other
evidence of indebtedness of any Subsidiary to any party other than the
Bank, or under any indenture or other writing under which any such
evidence of indebtedness has been issued or by which it is governed or
the acceleration of payment of any such indebtedness following the
passage of any applicable grace or cure period, resulting in a Material
Adverse Effect; or
(e) Any Subsidiary shall suffer a final judgment or other
order for the payment of money in the amount of $10,000,000.00 or more
or which otherwise results in a Material Adverse Effect that is not or
is no longer subject to a stay pending appeal; or
(f) The issuance or levy of any writ, warrant, attachment,
garnishment, execution or similar process against any property of any
Subsidiary, or the attachment of any tax lien to any property of any
Subsidiary which has not been stayed.
Section 8.03 Rights and Remedies. Upon the commencement of any
proceeding under any bankruptcy law by or against the Borrower, the Line of
Credit shall automatically terminate, and all principal, interest, and other
charges, fees and expenses under the Revolving Note and this Agreement and all
other Obligations to the Bank shall become immediately due and payable in full,
all without declaration, presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower. Upon the
occurrence of any Event of Default or at any time thereafter until such Event of
Default is cured to the written satisfaction of the Bank, the Bank may exercise
any and all of the following rights and remedies:
(a) The Bank may, by notice to the Borrower, declare the Line
of Credit to be terminated, whereupon the same shall terminate.
(b) The Bank may declare all principal, interest and other
charges, fees and expenses under the Revolving Note and this Agreement
and all other Obligations to the Bank to be immediately due and payable
in full, whereupon the same shall become immediately due and payable in
full, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower.
20
(c) The Bank may exercise and enforce its rights and remedies
under the Deposit Account Assignment, the Security Agreement, the other
writings contemplated hereby, the Uniform Commercial Code and any other
applicable law.
Section 8.04 Assignment and Setoff. The Borrower grants the Bank a lien
and security interest in all of the Borrower's present and future property now
or hereafter in the possession, control or custody of, or in transit to, the
Bank for any purpose, and the balance of every present and future account of the
Borrower with the Bank, including without limitation, the Cash Collateral
Account, and each present and future claim of the Borrower against the Bank.
Such lien and security interest secures all present and future debts,
obligations and liabilities of the Borrower to the Bank. The Bank may, at any
time following the occurrence of an Event of Default place a freeze or block on
such account balances and foreclosure such lien and security interest, and the
Bank may offset of charge all or any part of the aggregate amount of the
Obligations against any such account without any advance notice. The Bank agrees
to promptly notify the Borrower following the exercise of its offset rights
under this Section 8.04, provided that failure to give such notice shall not
effect the validity of such action or the application of any funds of the
Borrower to the payment of the Obligations as provided in this Section 8.04.
ARTICLE IX.
Miscellaneous
Section 9.01 Waiver and Amendment. No provision of any of the Credit
Documents can be waived, except by a writing executed by the Bank, nor may any
provision of this Credit Agreement be modified, amended, abridged, replaced,
supplemented or terminated, except by a writing executed by the Bank and the
Borrower. A waiver by the Bank shall be effective only in the specific instance
and for the specific purpose given. No delay or failure by the Bank to exercise
any right or remedy shall be a waiver thereof nor shall any single or partial
exercise by the Bank of any right or remedy preclude any other exercise thereof
or the exercise of any other right or remedy. All rights and remedies of the
Bank under this Agreement and any other writing are cumulative and not
exclusive.
Section 9.02 Indemnification. The Borrower agrees to indemnify and hold
harmless the Bank and the Bank's former, present and future officers, directors,
employees, agents, shareholders, affiliates and attorneys, and all of their
respective heirs, representatives, successors and assigns, from any and all
losses, liabilities (including without limitation strict liability), suits,
obligations, fines, damages, judgments, penalties, actions, causes of action,
charges, costs and expenses, including but not limited to reasonable attorneys'
fees and legal expenses and consultants' fees and expenses, whether based on
tort, contract, implied or express warranty, statute, regulation, common law or
otherwise, arising out of or related to the presence on, remediation of or
release from any property at any time owned, operated or controlled by the
Borrower, including without limitation any building, structure or equipment
thereon, of any toxic or hazardous waste, constituent or substance or in
connection with any Environmental Law applicable to any such hazardous or toxic
waste, constituent or substance, unless the same was caused solely by any action
or inaction of the Bank or any of its former, present or future officers,
directors, employees, agents, shareholders, affiliates or attorneys or any of
their respective heirs, representatives, successors or assigns.
Section 9.03 Costs and Expenses. The Borrower shall pay to the Bank on
demand all of the Bank's fees, costs and expenses, including but not limited to
audit fees and expenses and reasonable attorneys' fees and legal expenses, in
connection with the preparation, amendment, administration and enforcement of
this
21
Agreement and the writings contemplated by this Agreement and the transactions
and matters relating to this Agreement and any such writings, including without
limitation, all reasonable attorneys' fees and legal expenses incurred by the
Bank in connection with or arising from any bankruptcy or insolvency case or
proceeding filed by or against the Borrower.
Section 9.04 Addresses. All notices, requests, demands and other
communications provided for under this Agreement and the writings contemplated
by this Agreement shall be in writing and shall be delivered in person, faxed,
or deposited in the mail, postage prepaid, addressed as follows:
If to Borrower: IDENTIX INCORPORATED
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
If to the Bank: ASSOCIATED BANK MINNESOTA, NATIONAL ASSOCIATION
Attention: G. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
or, as to each party, at such other address or fax number as shall be designated
by such party in a written notice to the other party complying as to delivery
with the terms of this Section. All such notices, requests, demands and other
communications shall be effective when actually delivered, faxed, or deposited
in the mail, except that notices and requests to the Bank pursuant to Article II
shall not be effective until received by the Bank.
Section 9.05 Binding Effect and Assignment. The Credit Documents shall
bind and benefit the parties hereto and thereto and their respective successors
and assigns, except that the Borrower shall have no right to assign any of its
rights hereunder or thereunder or any interest herein or therein without the
prior written consent of the Bank, and any assignment in violation of this
sentence shall be void. If any provision or application of any of the Credit
Documents are held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect the other provisions or applications which can
be given effect, and this Agreement and such writings shall be construed as if
the unlawful or unenforceable provision or application had never been contained
herein or therein or prescribed hereby or thereby.
Section 9.06 Jurisdiction and Venue. The Borrower consents to the
personal jurisdiction of the state and federal courts located in the State of
Minnesota in connection with any controversy related in any way to any of the
Credit Documents or any transaction or matter relating to any of the Credit
Documents, waives any argument that venue in such forums is not convenient, and
agrees that any litigation initiated by the Borrower against the Bank in
connection with any of the Credit Documents or any transaction or matter
relating to any of the Credit Documents shall be venued in either the District
Court of Hennepin County, Minnesota, or the United States District Court,
District of Minnesota, Fourth Division.
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Section 9.07 Headings. Article and Section headings in this Agreement
are for convenience of reference only, and shall not constitute a part of this
Agreement for any other purpose or a limitation of the scope of the particular
Articles or Sections to which they refer.
Section 9.08 Governing Law. This Agreement and the writings
contemplated by this Agreement shall be governed by and construed in accordance
with the internal laws of the State of Minnesota (excluding its conflict of law
rules).
Section 9.09 Confidentiality. The Bank agrees to keep confidential any
non-public information delivered to the Bank under this Credit Agreement in
accordance with the Bank's privacy policy, a copy of which has been delivered to
the Borrower herewith.
THE BORROWER AND THE BANK HEREBY WAIVE ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING RELATING TO ANY OF THE CREDIT DOCUMENTS, THE
OBLIGATIONS THEREUNDER, ANY COLLATERAL SECURING SUCH OBLIGATIONS, OR ANY
TRANSACTION ARISING THEREFROM OR CONNECTED THERETO. THE BORROWER AND THE BANK
EACH REPRESENTS TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY GIVEN.
THE BORROWER REPRESENTS, WARRANTS AND CERTIFIES TO THE BANK AND AGREES
THAT THE BORROWER HAS READ ALL OF THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS
AND UNDERSTANDS ALL OF ITS PROVISIONS.
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Executed as of the date first above written.
BORROWER:
IDENTIX INCORPORATED,
a Delaware corporation
By:
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Its: Chief Financial Officer
BANK:
ASSOCIATED BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association
By:
---------------------------------
G. ▇▇▇▇▇▇▇ ▇▇▇▇
Its: Vice President
24
EXHIBIT A
BORROWING BASE CERTIFICATE
The undersigned chief financial officer of IDENTIX INCORPORATED, a
Delaware corporation (the "BORROWER"), pursuant to the Credit Agreement dated
May 30, 2003 (the "AGREEMENT"), hereby certifies to ASSOCIATED BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association (the "BANK") as follows:
As the close of business on _____________________, 200_, the Borrowing
Base and the unpaid principal balance of the Revolving Note were as follows:
4. Accounts Receivable $___________(1)
5. Less: Ineligibles
Over 120 days $__________
10% Rule $__________
Other Ineligibles $__________
Contra Accounts $__________
Total Ineligibles $__________(2)
3. Eligible Accounts Receivable (1 minus 2) $___________(3)
4. 80% of Line 3 $___________(4)
5. Credit Limit (lesser of $15,000,000 or Line 4) $___________(5)
6. Unpaid Principal Balance of Revolving Note $___________(6)
7. Face Amount of Letter of Credit outstanding $___________(7)
8. Availability or (Shortfall) (5 minus 6 and 7) $___________(8)
As the date of this Certificate, no event has occurred which
constitutes an Event of Default as defined in the Agreement or would constitute
an Event of Default under the Agreement with notice or passage of time or both.
Date of Certificate _________________, ________.
_________________________________
Signature
EXHIBIT B
CERTIFICATE OF INDEBTEDNESS AND LIENS
The undersigned chief financial officer of IDENTIX INCORPORATED, a
Delaware corporation (the "BORROWER") pursuant to the Credit Agreement dated May
30, 2003, hereby certifies to ASSOCIATED BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association (the "BANK"), that the following is a true,
complete and correct list of all existing Debt of the Borrower and all existing
mortgages, deeds of trust, assignments, security interests and other liens on
any of the properties of the Borrower, whether now owned or hereafter acquired,
securing any indebtedness of the Borrower or any other person or entity:
Date Principal Debtor Creditor(s) Principal Balance Payment Schedule Security
---- ---------------- ----------- ----------------- ---------------- --------
Date of Certificate_____________, ______________
____________________________
Signature
EXHIBIT C
COVENANT COMPLIANCE CERTIFICATE
The undersigned chief financial officer of IDENTIX INCORPORATED, a
Delaware corporation (the "BORROWER") pursuant to the Credit Agreement dated May
30, 2003, hereby certifies to ASSOCIATED BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association (the "BANK") as follows:
As of the close of business on __________________, _____, the following
amounts and ratios of the Borrower were true and correct:
1. Ratio of Debt to Tangible Net Worth for Quarter Ending
a. Debt $___________
b. Tangible Net Worth $___________
c. Actual Ratio of Debt to Tangible Net Worth ___________
f. Maximum Ratio 1.0 to 1.0
3. Debt Service Coverage Ratio for Fiscal Year Ending
a. Net Income + Interest + Depreciation $___________
and Amortization less Distributions
b. Current Maturities for Principal and
Interest on Debt $___________
c. Actual Debt Service Coverage Ratio (a to b) $___________
d. Minimum Debt Service Coverage Ratio 1.25 to 1.0
As the date of this Certificate, no event has occurred which
constitutes and Event of Default as defined in the Agreement or would constitute
an Event of Default under the Agreement with notice or the passage of time or
both.
Date of Certificate____________, _____________
_______________________________
Signature