AMENDED AND RESTATED LOAN AGREEMENT between KEY TECHNOLOGY, INC. as Borrower and BANNER BANK as Lender June 6, 2005
Exhibit
10.1
AMENDED
AND RESTATED LOAN AGREEMENT
between
KEY
TECHNOLOGY, INC.
as
Borrower
and
BANNER
BANK
as
Lender
__________________________________________________________________
June
6, 2005
___________________________________________________________________
TABLE
OF CONTENTS
Page
ARTICLE
1 DEFINITIONS
Section
1.1 Certain
Defined Terms
Section
1.2 General
Principles Applicable to Definitions
Section
1.3 Accounting
Terms
Section
1.4 UCC
Terms
ARTICLE
2 THE LOANS
Section
2.1 The
Loans.
(a) Revolving
Credit Line
(b) Term
Loan
Section
2.2 Manner
of Borrowing
Section
2.3 Repayment
of Principal.
(a) Revolving
Credit Line
(b) Term
Loan
Section
2.4 Interest
on Loans.
(a) General
Provisions
(b) Selection
of Alternative Rates.
(c) Applicable
Days for Computation of Interest
(d) Unavailable
LIBOR Rate
(e) Increased
Costs
(f) Increased
Capital Requirements
(g) Illegality
Section
2.5 Notes;
Recordation of Loans.
(a) Notes
(b) Recordation
of Loans
Section
2.6 Manner
of Payments.
(a) Form
and Place of Payment
(b) Authorization
to Charge Borrower’s Account
(c) Non-Business
Days
Section
2.7 Prepayments
Section
2.8 Application
of Payments.
(a) Payments
Before Default
(b) Payments
After Default
Section
2.9 Unused
Commitment Fees
ARTICLE
3 CONDITIONS TO LENDING
Section
3.1 Conditions
to Initial Loan
(a) Loan
Documents
(b) Borrower
Authority
(c) Certificate
(d) Loan
Fees
(e) Evidence
of Security
(f) Evidence
of Insurance
i
SEA
1634275v7 58243-2
(g) Consents
Section
3.2 Conditions
to All Loans
(a) Prior
Conditions
(b) Notice
of Borrowing
(c) No
Default
(d) Other
Information
ARTICLE
4 REPRESENTATIONS AND WARRANTIES
Section
4.1 Existence
and Power
Section
4.2 Authorization
Section
4.3 Government
Approvals, Etc.
Section
4.4 Binding
Obligations, Etc.
Section
4.5 Litigation
Section
4.6 Financial
Condition
Section
4.7 Title
and Liens
Section
4.8 Intellectual
Property
Section
4.9 Environmental
Laws, Etc.
Section
4.10 Taxes
Section
4.11 Other
Agreements
Section
4.12 Labor
Matters
Section
4.13 Federal
Reserve Regulations
Section
4.14 ERISA.
Section
4.15 Subsidiaries
Section
4.16 Not
Investment Company, Etc.
Section
4.17 Representations
as a Whole
ARTICLE
5 AFFIRMATIVE COVENANTS
Section
5.1 Use
of Proceeds
Section
5.2 Payment
Section
5.3 Preservation
of Corporate Existence, Etc.
Section
5.4 Visitation
Rights
Section
5.5 Keeping
of Books and Records
Section
5.6 Maintenance
of Property, Etc.
Section
5.7 Compliance
With Laws, Etc.
Section
5.8 Other
Obligations
Section
5.9 Insurance
Section
5.10 Borrower
Financial Information
(a) Annual
Audited Financial Statements
(b) Monthly
Unaudited Financial Statements
(c) Monthly
Compliance Certificates
(d) Reports
to Stockholders
(e) Other
Section
5.11 Notification
Section
5.12 Payment
of Expenses
Section
5.13 Additional
Payments; Additional Acts
Section
5.14 Financial
Covenants.
(a) Debt
to Tangible Net Worth Ratio
ii
SEA
1634275v7 58243-2
(b) Fixed
Charge Coverage Ratio
(c) Minimum
Net Income
ARTICLE
6 NEGATIVE COVENANTS
Section
6.1 Dividends
Section
6.2 Liquidation,
Merger, Sale of Assets
Section
6.3 Indebtedness
Section
6.4 Guaranties,
Etc.
Section
6.5 Liens
Section
6.6 Investments
Section
6.7 Operations
Section
6.8 ERISA
Compliance
Section
6.9 Accounting
Change
ARTICLE
7 EVENTS OF DEFAULT
Section
7.1 Events
of Default
(a) Payment
Default
(b) Breach
of Warranty
(c) Breach
of Certain Covenants
(d) Breach
of Other Covenants
(e) Extraordinary
Situation
(f) Cross-default
(g) Involuntary
Bankruptcy, Etc.
(h) Voluntary
Bankruptcy, Etc.
(i) Judgment
(j) ERISA
(k) Change
in Ownership or Control
(l) Condemnation
(m) Governmental
Approvals
(n) Other
Government Action
(o) Failure
of Security
(p) Invalidity
of Loan Documents
Section
7.2 Consequences
of Default.
(a) General
(b) Cash
Collateral
ARTICLE
8 MISCELLANEOUS
Section
8.1 No
Waiver; Remedies Cumulative
Section
8.2 Governing
Law
Section
8.3 Consent
to Jurisdiction
Section
8.4 Waiver
of Jury Trial
Section
8.5 Notices
Section
8.6 Borrower’s
Indemnity
Section
8.7 Assignment
Section
8.8 Set-Off
Section
8.9 Severability
Section
8.10 Survival
iii
SEA
1634275v7 58243-2
Section
8.11 Executed
in Counterparts
Section
8.12 Conditions
Not Fulfilled
Section
8.13 Entire
Agreement; Amendment, Etc.
Section
8.14 Construction
Section
8.15 References
to Loan Agreement
Section
8.16 USA
Patriot Act Notice
Section
8.17 Oral
Agreements Not Enforceable.
SCHEDULES
Schedule
1 - Litigation
Schedule
2 - Liens
Schedule
3 - Intellectual
Property Matters
Schedule
4 - Environmental
Matters
Schedule
5 - Subsidiaries
Schedule
6 - Indebtedness
EXHIBITS
Exhibit
A-1 - Revolving
Note
Exhibit
A-2 - Term
Note
Exhibit
B - Security
Agreement
iv
SEA
1634275v7 58243-2
AMENDED
AND RESTATED LOAN AGREEMENT
THIS
AMENDED AND RESTATED LOAN AGREEMENT (the “Agreement”)
is made as of the 6th day of June, 2005, by and between KEY TECHNOLOGY, INC.,
an
Oregon corporation (the “Borrower”),
and BANNER BANK, a Washington banking corporation (the “Lender”).
RECITALS
A. Borrower
and Lender are parties to that certain Loan Agreement dated as of August 9,
2002, as amended by that certain Amendment to Loan Documents dated as of
December 11, 2002, by that certain Letter Agreement dated March 24,
2003, by that certain Change In Terms Agreement dated May 1, 2003, by
that
certain Amendment to Loan Documents dated July 31, 2003, by that certain
Letter Agreement dated July 26, 2004, by that certain Letter Agreement
dated December 7, 2004, and by that certain Second Amendment to Loan
Agreement dated March ___31___, 2005 (as amended, restated, supplemented or
otherwise modified, the “Existing
Agreement”),
pursuant to which Lender agreed to make and has made revolving and term loans
to
Borrower.
B. The
revolving credit facility under the Existing Loan Agreement expired on
April 10, 2005, and Borrower has requested Lender to extend the expiration
date of such revolving credit facility until April 10, 2006, and to
make
certain other modifications to, and otherwise amend and restate the Existing
Agreement in its entirety, which Lender has agreed to do so on the terms and
conditions set forth in this Agreement.
NOW,
THEREFORE, the parties hereto hereby agree to amend and restate the Existing
Agreement in its entirety as follows:
ARTICLE
1
DEFINITIONS
Section
1.1
Certain
Defined Terms.
As used in this Agreement, the following terms have the following
meanings:
“Affiliate”
means any Person who, directly or indirectly, controls or is controlled by
or is
under common control with such Person.
“Agreement”
means this Loan Agreement as it may be amended, restated, supplemented or
otherwise modified from time to time.
“Bankruptcy
Code”
means Title 11 of the United States Code entitled “Bankruptcy,” as amended from
time to time.
“Borrower”
means Key Technology, Inc., an Oregon corporation, and any
Successor.
“Business
Day”
means any day other than Saturday, Sunday or other day on which banks are
authorized or obligated to close in Walla Walla, Washington, except that in
the
context of the selection of a Loan accruing interest at the Revolving LIBOR
Rate
or the calculation of the
1
Revolving
LIBOR Rate for any Interest Period, in which event “Business Day” means any day,
other than Saturday, Sunday or other day on which banks are authorized or
obligated to close in Walla Walla, Washington, and on which dealings are carried
on in the London interbank market.
“BV
Credit Facility”
means the credit facility made available by ABN AMRO Bank N.V. to Key Technology
BV, a wholly-owned Subsidiary of Borrower, comprised of a revolving line of
credit and a term loan, secured in each case by the assets and properties of
Key
Technology BV.
“Capital
Leases”
means for any Person, all obligations of such Person under leases which shall
have been, or in accordance with GAAP, should be recorded as capital
leases.
“Cash
Equivalents”
means for any Person, (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in
each case maturing within one year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one year from the date issued
and, at the time of acquisition, having a rate of at least A-1 from Standard
& Poor’s Rating Services or at least P-1 from ▇▇▇▇▇’▇ Investors Service,
Inc.; (iii) certificates of deposit or bankers’ acceptances maturing within
one year from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from any commercial bank organized under the laws of
the
United States or any state thereof or the District of Columbia having combined
capital and surplus of not less than One Hundred Million Dollars ($100,000,000);
(iv) time deposits maturing no more than thirty (30) days from the date
of
creation thereof and demand deposits with commercial banks having membership
in
the Federal Deposit Insurance Corporation in amounts not exceeding the lesser
of
One Hundred Thousand Dollars ($100,000) or the maximum amount of insurance
applicable to the aggregate amount of such Person’s deposits at such
institution; and (v) deposits or investments in mutual or similar funds
offered or sponsored by brokerage or other companies having membership in the
Securities Investor Protector Corporation investing only in obligations
described in clauses (i) through (iv) above.
“Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
“Collateral”
means the property in which the Security Documents create or purport to create
a
security interest or other lien in favor of Lender.
“Commitment”
means Lender’s obligation to make Revolving Loans.
“Controlled
Group”
means all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together
with Borrower, are treated as a single employer under Section 414(b)
or
414(c) of the Code.
“Credit
Utilization”
means, as of any date of determination, the sum of (i) the aggregate
principal amount of all outstanding Revolving Loans; plus
(ii) the Letter of Credit Usage.
“Current
Balance Sheet”
has the meaning given in Section
4.6.
“Default”
means any event which but for the passage of time, the giving of notice, or
both
would be an Event of Default.
2
“EBITDA”
means, for any period, for any Person, an amount equal to the net income of
such
Person for such period plus
the sum of the following to the extent deducted in calculating such net income
(i) interest expense (exclusive of interest income) of such Person
(including capitalized interest) and the interest component of rentals paid
or
accrued under Capital Leases, (ii) income tax expense of such Person,
(iii) depreciation, amortization and other non-cash charges to income
and
(iv) non-cash extraordinary, unusual or nonrecurring expenses or losses,
in
each case determined in accordance with GAAP for such period.
“Environmental
Laws”
means all federal, state and local statutes, regulations, ordinances, and
requirements, now or hereafter in effect, pertaining to environmental
protection, contamination or cleanup, including without limitation (i) the
Federal Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901,
et
seq.),
(ii) the Federal Comprehensive Environmental Response, Compensation,
and
Liability Act (42 U.S.C. § 9601, et
seq.),
(iii) the Federal Hazardous Materials Transportation Control Act (49
U.S.C.
§ 1801, et
seq.),
(iv) the Federal Clean Air Act (42 U.S.C. § 7401, et
seq.),
(v) the Federal Water Pollution Control Act, Federal Clean Water Act
(33
U.S.C. § 1251, et
seq.),
(vi) the Federal Insecticide, Fungicide, and Rodenticide Act, Federal
Pesticide Act (7 U.S.C. § 136, et
seq.),
(vii) the Federal Toxic Substances Control Act (15 U.S.C. § 2601,
et
seq.),
(viii) the Federal Safe Drinking Water Act (42 U.S.C. § 300f,
et
seq.),
(ix) the Washington Model Toxics Control Act (RCW 70.105(d), et
seq.),
(x) the Washington Underground Petroleum Storage Tanks Act (RCW Chapter
70.148, et
seq.),
(xi) Washington Water Pollution Control Act (RCW 90.48, et
seq.),
(xii) Washington Oil and Hazardous Substance Spill Prevention and Response
Act, (RCW 90.56, et
seq.),
(xiii) Washington Clean Air Act (RCW 70.94, et
seq.),
(xiv) Washington Hazardous Waste Management Act (RCW 70.105, et
seq.),
(xv) State Environmental Policy Act (RCW 43.21C, et
seq.),
(xvi) Pollution Disclosure Act of 1971 (RCW 90.52, et
seq.),
(xvii) Hazardous Substances, Radiation Sources (ORS §§ 453.01, et
seq.),
(xviii) Solid Waste Control (ORS §§ 459.005, et
seq.),
(xix) Hazardous Waste and Hazardous Materials I (ORS §§ 465.003,
et
seq.),
(xx) Hazardous Waste and Hazardous Materials II (ORS §§ 466.005,
et
seq.),
(xxi) Air Quality (ORS §§ 468A.005, et
seq.),
(xxii) Water Quality (ORS §§ 468B.005, et
seq.),
(xxiii) Oregon Drinking Water Quality Act (ORS §§ 448.115,
et
seq.)
and (xxiv) Ground Water Act of 1955, ORS §§ 537.505, et
seq.),
all as now or hereafter amended.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from
time
to time.
“Event
of Default”
has the meaning given in Section
7.1.
“Financial
Transaction Liability”
means (i) any overdraft on any account maintained by Borrower or any
Subsidiary with Lender, (ii) liabilities owing by Borrower or any
Subsidiary to Lender with respect to bank card services and
(iii) liabilities incurred by Lender as a result of Automated Clearing
House transactions for the account of Borrower or any Subsidiary.
“Funded
Debt”
means, for any Person, without duplication (i) all indebtedness or
liability of such Person for borrowed money or for the deferred purchase price
of property (other than trade payables entered into in the ordinary course
of
business on ordinary terms), (ii) all non-contingent reimbursement or
payment obligations with respect to letters of credit, bankers acceptances,
surety bonds and similar instruments, (iii) all obligations of such
Person
with
3
respect
to Capital Leases that are capitalized in the balance sheet of such Person,
(iv) all indebtedness or liability of such Person for the mandatory
redemption of its preferred stock and (v) all indebtedness or liability
for
borrowed money or for the deferred purchase price of property (other than trade
payables entered into in the ordinary course of business on ordinary terms)
or
for Capital Leases for which such Person is directly or contingently liable
as
obligor, guarantor, or otherwise, or in respect of which such Person otherwise
assures a creditor against loss.
“GAAP”
shall have the meaning given in Section
1.3.
“Government
Approval”
means an approval, permit, license, authorization, certificate, or consent
of
any Governmental Authority.
“Governmental
Authority”
means the government of the United States or any State or any foreign country
or
any political subdivision of any thereof or any branch, department, agency,
instrumentality, court, tribunal or regulatory authority which constitutes
a
part or exercises any sovereign power of any of the foregoing.
“Hazardous
Substances”
means any substance or material defined or designated as hazardous or toxic
waste, hazardous or toxic material, a hazardous, toxic or radioactive substance,
or other similar terms, by any federal, state or local environmental statute,
regulation or ordinance presently in effect, including but not limited to the
Environmental Laws.
“Indebtedness”
means, for any Person, without duplication:
(a) all
indebtedness for borrowed money;
(b) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than indebtedness or liability for borrowed money
deferred for a period of more than six months from the date of incurrence or
trade payables entered into in the ordinary course of business on ordinary
terms);
(c) all
non-contingent reimbursement or payment obligations with respect to letters
of
credit, bankers acceptances, surety bonds and similar instruments;
(d) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses;
(e) the
net obligations of such Person under an interest rate swap agreement or similar
rate swap master agreement in an amount equal to (i) if such swap agreement
has been closed out, the termination value thereof, or (ii) if such
swap
agreement has not been closed out, the ▇▇▇▇-to-market value thereof determined
on the basis of readily available quotations provided by any recognized dealer
in such swap agreement;
(f) all
indebtedness created or arising under any conditional sale or other title
retention agreement (excluding any operating lease), or incurred as financing,
in either case with respect to property acquired by such Person (even though
the
rights and
4
remedies of the seller or bank under such agreement in the event of default
are
limited to repossession or sale of such property);
(g) all
obligations with respect to Capital Leases or Synthetic Leases;
(h) all
indebtedness referred to in clauses (a) through (g) above secured by
(or
for which the holder of such Indebtedness has an existing right, contingent
or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and
(i) all
liabilities in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (h) above for which such Person is
directly or contingently liable as obligor, guarantor, or otherwise, or in
respect of which such Person otherwise assures a creditor against
loss.
For
purposes of this Agreement, the Indebtedness of any Person shall include all
recourse Indebtedness of any partnership or joint venture formed as a
partnership where such Person is a general partner or is otherwise liable for
the Indebtedness of such partnership or joint venture, unless such Indebtedness
is expressly made non-recourse to such Person and except for customary
exceptions acceptable to Lender.
“Intellectual
Property”
means, as to any Person, all of the following:
(a) all
trademarks, service marks, designs, trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers owned or used by such Person in its
business or hereafter adopted or acquired, all registrations and recordings
thereof, and all registration and recording applications filed in connection
therewith, including registrations and pending applications in the United States
Patent and Trademark Office, any State of the United States or any similar
offices in any other country or any political subdivision thereof, and all
extensions or renewals thereof;
(b) all
letters patent of the United States or any other country or any political
subdivision thereof, all registrations and recordings thereof, and all
applications for letters patent of the United States or the equivalent thereof
in any other country owned by such Persons, including registrations, recordings
and pending applications in the United States Patent and Trademark Office or
the
equivalent thereof in any similar offices in any other country, and all
reissues, continuations, divisions, continuations-inpart, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the right
to
make, use and/or sell the inventions disclosed or claimed therein;
(c) all
computer programs, computer data bases, other computer software, trade secrets,
trade secret rights, ideas, drawings, designs, schematics, algorithms, writings,
techniques, processes and formulas owned or used by such Person in its business;
and
5
(d) all
copyright rights of such Person in any work subject to the copyright laws of
the
United States, any state thereof or any other country or any political
subdivision thereof, whether registered or unregistered and whether published
or
unpublished, whether as author, assignee, transferee or otherwise, and all
registrations and applications for registration of any such copyright in the
United States, any state thereof or any other country or any political
subdivision thereof, including registrations, recordings, supplemental
registrations and pending applications for registration in the United States
Copyright Office or in any similar offices in any other country.
“Interest
Period”
means, with respect to any LIBOR Rate Loan, the period commencing on the first
day Borrower elects to have such LIBOR Rate apply to such Loan and ending one
(1), two (2) or three (3) months thereafter, as specified in the Interest Rate
Notice given in respect of such Loan, or as otherwise determined pursuant to
Section
2.4(b);
provided,
however,
that no Interest Period may be selected for any Loan if it extends beyond the
Revolving Maturity Date.
“Interest
Rate Notice”
has the meaning given in Section
2.4(b).
“Lender”
means Banner Bank, a Washington banking corporation, and its
Successors.
“Letter
of Credit”
means any standby or commercial letter of credit issued by Lender for Borrower’s
account.
“Letter
of Credit Application”
means a letter of credit application in the standard form then used by Lender
executed and delivered by Borrower in respect of a Letter of
Credit.
“Letter
of Credit Usage”
means, as of any date of determination, the sum of (i) the aggregate
face
amount of all outstanding unmatured Letters of Credit plus
(ii) the aggregate amount of all payments made by Lender under Letters
of
Credit and not yet reimbursed by Borrower.
“LIBOR
Rate”
means, for any Interest Period, the rate (expressed as a decimal) reported
as
the London Interbank Offered Rate as made available by the British Bankers
Association (“BBA”)
equal to the average per annum interest rate (rounded upward to the nearest
1/100th of one percent) at which U.S. dollar deposits would be offered for
such
Interest Period by major banks in the London interbank market. The LIBOR rate
is
determined by the BBA on each Business Day at approximately 11:00 a.m. (London
time). If the BBA ceases reporting London Interbank Offered Rates comparable
to
those currently reported, the LIBOR Rate shall be another reasonably comparable
rate selected by Lender.
“LIBOR
Rate Loan”
means any Revolving Loan (or portion thereof) bearing interest at the Revolving
LIBOR Rate.
“Lien”
means, for any Person, any security interest, pledge, mortgage, charge,
assignment, hypothecation, encumbrance, attachment, garnishment, execution
or
other voluntary or involuntary lien upon or affecting the revenues of such
Person or any real or personal property in which such Person has or hereafter
acquires any interest.
6
“Loan
Documents”
means, collectively, this Agreement, the Notes, the Letter of Credit
Applications and the Security Documents, as any thereof shall be amended,
restated, supplemented or otherwise modified from time to time and all other
certificates, instruments and other documents executed by Borrower in connection
with this Agreement or the transactions contemplated hereby.
“Loans”
means, collectively, the Revolving Loans and the Term Loan, and “Loan”
means any Revolving Loan or the Term Loan as the case may be.
“Note”
and “Notes”
have the meanings given in Section
2.5(a).
“Notice
of Borrowing”
means a request for a Loan from Borrower delivered to Lender in the manner,
at
the time and containing the information required under Section
2.2.
“Officer’s
Certificate”
means a certificate executed and delivered on behalf of Borrower by a
Responsible Officer.
“PBGC”
means the Pension Benefit Guaranty Corporation or any entity succeeding to
any
or all of its functions under ERISA.
“Pension
Plan”
means an “employee pension benefit plan” (as such term is defined in ERISA) from
time to time maintained by Borrower or a member of a Controlled
Group.
“Permitted
Liens”
means: (i) Liens securing Taxes which are not delinquent or which remain
payable without penalty (excluding any Liens imposed pursuant to any of the
provisions of ERISA) or the validity or amount of which is being contested
in
good faith by appropriate proceedings, so long as (A) adequate reserves
or
other appropriate provision, as shall be required in conformity with GAAP shall
have been made therefor, and (B) in the case of a Lien against any of
the
Collateral, such contest proceedings operate to stay the sale of any portion
of
the Collateral to satisfy such Taxes; (ii) Liens imposed by law (such
as
mechanics’, processor’s, materialmen’s, carriers’, warehousemen’s and landlord’s
liens) incurred in good faith in the ordinary course of business which are
not
delinquent or which remain payable without penalty or the validity or amount
of
which is being contested in good faith by appropriate proceedings, so long
as
(A) adequate reserves or other appropriate provision, as shall be required
in conformity with GAAP shall have been made therefor, and (B) in the
case
of a Lien against any of the Collateral, such contest proceedings operate to
stay the sale of any portion of the Collateral to satisfy the obligation secured
by such Lien; (iii) Liens arising in connection with worker’s compensation,
unemployment insurance, old age pensions and social security benefits which
are
not delinquent or which remain payable without penalty or the validity or amount
of which is being contested in good faith by appropriate proceedings, so long
as
(A) adequate reserves or other appropriate provision, as shall be required
in conformity with GAAP shall have been made therefor, and (B) in the
case
of a Lien against any of the Collateral, such contest proceedings operate to
stay the sale of any portion of the Collateral to satisfy the obligation secured
by such Lien; (iv) Liens incurred or deposits made in the ordinary course
of business to secure the performance of bids, tenders, statutory obligations,
fee and expense arrangements with trustees and fiscal agents (exclusive of
obligations incurred in connection with the borrowing of money) and customary
deposits granted in the ordinary course of business under operating
leases;
7
(iv) Liens
securing surety, indemnity, performance, appeal and release bonds;
(v) customary rights of set off, revocation, refund or chargeback under
deposit agreements or under the UCC in favor of banks or other financial
institutions where Borrower or any Subsidiary maintains deposits in the ordinary
course of business; (vi) Liens constituting encumbrances in the nature
of
zoning restrictions, condemnations, easements, encroachments, covenants, rights
of way, minor defects, irregularities and rights or restrictions of record
on
the title or use of real property, which, in the reasonable judgment of Lender,
do not materially detract from the value of such property or materially impair
the use thereof in the business of Borrower or any Subsidiary; and
(vii) judgment Liens that have been bonded or execution thereon stayed
pending appeal.
“Person”
shall mean any natural person, corporation, unincorporated organization, trust,
joint stock company, joint venture, association, company, limited liability
company, partnership or government, or any agency or political subdivision
of
any government.
“Plan”
means, at any time, an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by Borrower
or
any member of a Controlled Group for employees of Borrower or any member of
a
Controlled Group or (ii) maintained pursuant to a collective bargaining
agreement or any other arrangement under which more than one employer makes
contributions and to which Borrower or any member of a Controlled Group is
then
making or accruing an obligation to make contributions or has within the
preceding five (5) plan years made contributions.
“Prime
Rate”
means, on any day, the prime rate as published in The
Wall Street Journal
in its “Money Rates” section (or if The
Wall Street Journal
shall cease to be published or to publish such rates, in such other nationally
recognized publication as Lender may, from time to time, specify) on such day,
or if The
Wall Street Journal
is not published on such day, on the last day before such day on which
The
Wall Street Journal
is published, whether or not such rate is actually ever charged or paid by
any
Person. Any change in the Prime Rate shall take effect on the day such change
is
published in The
Wall Street Journal.
“Prime
Rate Loan”
means any Revolving Loan (or portion thereof) bearing interest at the Revolving
Prime Rate and the Term Loan.
“Purchase
Money Lien”
means a Lien securing Indebtedness incurred in connection with the acquisition
of fixed or capital assets acquired after the date of this Agreement so long
as
(i) such Lien shall attach only to the property to be acquired, (ii) a
description shall have been furnished to Lender for any item or group of items
acquired in a single transaction or in a series of related transactions for
which the purchase price is greater than Two Hundred Fifty Thousand Dollars
($250,000), and (iii) the Indebtedness incurred shall not exceed the
purchase price of the item or items of fixed or capital assets
purchased.
“Responsible
Officer”
means any of the President, the Chief Executive Officer, the Chief Financial
Officer or the Treasurer of Borrower.
“Revolving
Commitment Amount”
means Ten Million Dollars ($10,000,000).
“Revolving
Commitment Period”
has the meaning given in Section
2.1(a).
8
“Revolving
Interest Rate”
means for each Revolving Loan (or portion of thereof) (i) the Prime
Rate
minus
one and one half percent (1.50%) or (ii) the LIBOR Rate plus
one and one tenth percent (1.10%), in each case as designated by Borrower in
an
Interest Rate Notice given with respect to such Revolving Loan (or portion
thereof) or as otherwise determined pursuant to Section
2.4(b).
“Revolving
LIBOR Rate”
has the meaning given in Section
2.4(b).
“Revolving
Loans”
has the meaning given in Section
2.1(a).
“Revolving
Maturity Date”
means April 10, 2006.
“Revolving
Note”
has the meaning given in Section
2.5(a).
“Revolving
Prime Rate”
has the meaning given in Section
2.4(b).
“Security
Agreement”
means that certain Security Agreement dated as of August 9, 2002, executed
by Borrower in favor of Lender substantially in the form of Exhibit B
attached hereto, as such security agreement may be amended, restated,
supplemented or otherwise modified from time to time.
“Security
Documents”
means (i) the Security Agreement, (ii) all financing statements,
fixture filings, landlord waivers and notices of security interests filed in
connection with the Security Agreement, and (iii) all other documents
and
instruments executed by Borrower or any Subsidiary in connection
therewith.
“Subsidiary”
means, for any Person, any corporation directly or indirectly controlled by
such
Person. For the purposes of this definition, “controlled by” shall mean the
possession, directly or indirectly of the power to direct or cause the direction
of the management or policies of such Subsidiary, whether through the ownership
of voting securities, by contract, or otherwise. Unless otherwise specified,
all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of Borrower.
“Successor”
means, for any corporation, partnership or banking association, any successor
by
merger or consolidation, or by acquisition of substantially all of the assets
of
the predecessor, or by conversion to another type of legal entity, or by
continuation after and the occurrence of an event that would otherwise result
in
termination under applicable law but for such continuation.
“Synthetic
Lease”
means (i) a so-called synthetic, off-balance sheet or tax retention
lease,
or (ii) an agreement for the use or possession of property creating
obligations which do not appear on the balance sheet of such Person but which,
upon the insolvency or bankruptcy of such Person, would be characterized as
the
Indebtedness of such Person (without regard to accounting
treatment).
“Tangible
Net Worth”
means, for any Person, the excess of total assets of such Person over total
liabilities of such Person, excluding, however, from the determination of total
assets (i) all assets which should be classified as intangible assets,
(ii) treasury stock, (iii) cash held in a
9
sinking
or other similar fund established for the purpose of redemption or other
retirement of capital stock, (iv) to the extent not already deducted
from
total assets, reserves for depreciation, depletion, obsolescence or amortization
of properties and other reserves or appropriations of retained earnings which
have been or should be established in connection with the business conducted
by
such Person, and (v) any re-evaluation or other write-up in book value
of
assets subsequent to the fiscal year of such Person ending immediately prior
to
the date hereof.
“Tax”
means, for any Person, any tax, assessment, duty, levy, impost or other charge
imposed by any Governmental Authority on such Person or on any property,
revenue, income, or franchise of such Person and any interest or penalty with
respect to any of the foregoing.
“Term
Loan”
has the meaning given in Section
2.1(b).
“Term
Loan Maturity Date”
means July 31, 2007.
“Term
Note”
has the meaning given in Section
2.5(a).
“UCC”
shall have the meaning given in Section
1.4.
“Unfunded
Capital Expenditures”
means, for any period, for any Person, the aggregate amount of expenditures
made
by such Person during such period for the purchase or other acquisition of
fixed
or capital assets less
an amount equal to the aggregate principal amount of all Indebtedness (including
Capital Leases) other than Loans assumed or incurred by such Person during
such
period for the purpose of financing such capital expenditures.
“Unfunded
Vested Liabilities”
means, with respect to any Plan at any time, the amount (if any) by which
(a) the present value of all vested non forfeitable benefits under such
Plan exceeds (b) the fair market value of all Plan assets allocable
to such
benefits, all determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential liability
of Borrower or any member of a Controlled Group to the PBGC or the Plan under
Title IV of ERISA.
“United
States”
and “U.S.”
each means the United States of America.
Section
1.2 General
Principles Applicable to Definitions.
Definitions
given herein shall be equally applicable to both singular and plural forms
of
the terms therein defined and references herein to “he” or “it” shall be
applicable to Persons whether masculine, feminine or neuter. References herein
to any document including, but without limitation, this Agreement shall be
deemed a reference to such document as it now exists, and as, from time to
time
hereafter, the same may be amended. References herein to any section,
subsection, Schedule or Exhibit shall, unless otherwise indicated, be deemed
a
reference to sections and subsections within, and Schedules and Exhibits to,
this Agreement.
Section
1.3 Accounting
Terms.
Except
as otherwise provided herein, accounting terms not specifically defined shall
be
construed, and all accounting procedures shall be performed, in accordance
with
generally accepted United States accounting principles consistently applied
from
and after the date hereof (“GAAP”)
and as in effect on the date of application.
10
Section
1.4 UCC
Terms.
Except
as otherwise provided herein, terms used herein that are defined in the UCC
have
the meanings given to them in the Uniform Commercial Code (the “UCC”)
as the same may, from time to time, be in effect in the State of
Washington.
ARTICLE
2
THE
LOANS
Section
2.1 The
Loans.
(a) Revolving
Credit Line.
Subject
to the terms and conditions of this Agreement, Lender agrees during the period
from the date this Agreement is executed and delivered by the parties hereto
until the Revolving Maturity Date (the “Revolving
Commitment Period”)
to make loans (the “Revolving
Loans”)
requested by Borrower in a Notice of Borrowing given under this Agreement;
provided
that, after giving effect to any such requested borrowing the Credit Utilization
will not exceed the Revolving Commitment Amount. The Revolving Loans described
in this Section
2.1(a)
constitute a revolving credit, and up to the Revolving Commitment Amount and
during the Revolving Commitment Period, Borrower may pay, prepay and
reborrow.
(b) Term
Loan.
On or about August 9, 2002, Lender made a term loan to Borrower (the
“Term
Loan”)
in the initial principal amount of Four Million Dollars
($4,000,000).
Section
2.2 Manner
of Borrowing.
For each requested Revolving Loan, Borrower shall give Lender prior notice
(a
“Notice
of Borrowing”)
specifying the date of a requested borrowing (which must be a Business Day)
and
the amount thereof. A Notice of Borrowing may be in writing or given orally
by a
Responsible Officer on the same day it wishes a Revolving Loan to be made;
provided that said Notice of Borrowing is received by Lender no later than
2:00
p.m. (Walla Walla time) on the date of the requested borrowing; provided,
further, that, any request given orally shall be confirmed by Borrower in a
writing or by e-mail delivered to Lender not later than 2:00 p.m. (Walla Walla
time) on the date such oral request is made. Each Notice of Borrowing shall
be
irrevocable and shall be deemed to constitute a representation and warranty
by
Borrower that (a) as of the date of such Notice of Borrowing the statements
set forth in Article 4 are true and correct in all material respects (subject
to
any waivers of the terms thereof then in effect in accordance with the terms
of
this Agreement); and (b) no Default or Event of Default shall have occurred
and is continuing or will result from disbursement of the requested Revolving
Loan. Each Revolving Loan requested by Borrower under this Section
2.2
shall be in an amount that is an integral multiple of Five Thousand Dollars
($5,000) and not less than Twenty-five Thousand Dollars ($25,000). Upon
fulfillment to Lender’s satisfaction of the applicable conditions set forth in
this Section
2.2
and in Article 3,
Lender will promptly make such funds available to Borrower by depositing them
into an account maintained by Borrower at Lender’s main office, Walla Walla,
Washington.
Section
2.3
Repayment
of Principal.
(a) Revolving
Credit Line.
On
each day that the Credit Utilization exceeds the Revolving Commitment Amount,
Borrower shall repay Revolving Loans in such an amount
11
as
is necessary to reduce the Credit Utilization to an amount equal to or less
than
the Revolving Commitment Amount, and, if, after repayment of all Revolving
Loans, the Credit Utilization exceeds the Revolving Commitment Amount, Borrower
shall deposit with or deliver to Lender and to grant to Lender, a security
interest in deposit account balances held or maintained in blocked,
non-interest-bearing deposit accounts at Lender to secure all advances to,
and
debts, liabilities, obligations, covenants and duties of Borrower arising under
the Loan Agreement and each other Loan Document, including, without limitation,
with respect to the Letters of Credit, pursuant to documentation in form and
substance satisfactory to Lender. Borrower shall repay to Lender the outstanding
principal balance of the Revolving Loans on or before the Revolving Maturity
Date.
(b) Term
Loan.
Borrower
shall repay to Lender the principal amount of Term Loan in consecutive quarterly
installments commencing on November 1, 2002 and continuing on the first
Business Day of each February, May, August and November thereafter in the amount
of Two Hundred Thousand Dollars ($200,000) and shall repay the remaining
principal amount of the Term Loan on the Term Loan Maturity Date.
Section
2.4 Interest
on Loans.
(a) General
Provisions.
Borrower
agrees to pay to Lender interest on the unpaid principal amount of each Loan
from the date of such Loan until such Loan shall be due and payable at a per
annum rate as follows: (i) for each Revolving Loan interest shall accrue
at
a per annum rate equal to the Revolving Interest Rate in effect from time to
time with respect to such Revolving Loan (or portions thereof) and (ii) for
the Term Loan interest shall accrue at a per annum rate equal to the Prime
Rate
(changing as such Prime Rate changes); provided,
however,
that after the occurrence and during the continuation of an Event of Default,
Revolving Loan interest and Term Loan interest shall accrue at a per annum
rate
equal to three percent (3%) above the Prime Rate (changing as such Prime Rate
changes). Accrued but unpaid interest on each Loan shall be paid in arrears
as
follows: (1) for each Revolving Loan (or portion thereof) bearing interest
at the Revolving Prime Rate, on the first Business Day of each calendar month
and at the Revolving Maturity Date, (2) for each Revolving Loan (or
portion
thereof) bearing interest at the Revolving LIBOR Rate, on the last day of the
Interest Period and (3) for the Term Loan, on the first Business Day
of
each February, May, August and November and at the Term Loan Maturity Date.
Accrued interest on any Loan shall be payable on demand after the occurrence
of
an Event of Default.
(b) Selection
of Alternative Rates.
(i) Borrower
may, subject to the requirements of this Section
2.4(b),
on two (2) Business Days’ prior notice, elect to have interest accrue on any
Revolving Loan (or any portion thereof) at the rate of interest set forth in
clause (ii) of the definition of Revolving Interest Rate (the “Revolving
LIBOR Rate”)
for an Interest Period. Such notice (herein, an “Interest
Rate Notice”)
shall be deemed delivered when received by Lender except that an Interest Rate
Notice received by Lender after 11:00 a.m. (Walla Walla time) on any Business
Day, shall be deemed to have been delivered or received on the immediately
succeeding Business Day. All Interest Rate Notices shall be in writing. Each
such Interest Rate Notice shall identify, subject to the conditions of this
Section
2.4(b),
the Revolving Loan or portions thereof
12
to
accrue interest at the Revolving LIBOR Rate and the Interest Period which
Borrower selects. Each such Interest Rate Notice shall be irrevocable and
shall
constitute a representation and warranty by Borrower that (1) as of
the
date of such Interest Rate Notice, the representations and warranties set
forth
in Article 4
hereof are true and correct in all material respects (subject to any waivers
of
the terms thereof then in effect in accordance with the terms of this Agreement)
as of the date of such Interest Rate Notice unless such representation and
warranty is made as of a specific date, and (2) no Default or Event
of
Default has occurred and is continuing.
(ii) Borrower’s
right to select the Revolving LIBOR Rate to apply to a Revolving Loan (or any
portion thereof) shall be subject to the following conditions: (1) the
aggregate of all Revolving Loans of the same type or portions thereof to accrue
interest at a particular Revolving LIBOR Rate for the same Interest Period
shall
be an integral multiple of Fifty Thousand Dollars ($50,000) and not less than
Two Hundred Fifty Thousand Dollars ($250,000); (2) the Revolving LIBOR
Rate
may not be selected for any Revolving Loan (or portion thereof) which is already
accruing interest at the Revolving LIBOR Rate unless such selection is only
to
become effective at the maturity of the Interest Period then in effect;
(3) Lender shall not have given notice pursuant to Section
2.4(e)
that the selected Revolving LIBOR Rate is not available; and (4) no
Default
or Event of Default shall have occurred and be continuing.
(iii) In
the absence of an effective request and acceptance thereof for the application
of a Revolving LIBOR Rate, the Revolving Loans (or remaining portions thereof)
shall accrue interest at the rate of interest set forth in clause (i)
of
the definition of Revolving Interest Rate (the “Revolving
Prime Rate”).
Any Interest Rate Notice which specifies a Revolving LIBOR Rate but fails to
identify an Interest Period shall be deemed to be a request for the designated
Revolving LIBOR Rate for an Interest Period of one (1) month.
(iv) The
Interest Rate Notice may be given with and contained in any Notice of
Borrowing.
(v) If
Borrower delivers an Interest Rate Notice with any Notice of Borrowing for
a
LIBOR Rate Loan and Borrower thereafter declines to take such LIBOR Rate Loan
or
a condition precedent to the making of such LIBOR Rate Loan is not satisfied
or
waived, then Borrower shall, upon demand by Lender, indemnify Lender for all
losses and any costs which Lender may sustain as a consequence thereof. A
certificate as to the amount of such losses and costs, submitted to Borrower
by
Lender, shall be conclusive and binding absent manifest error.
(c) Applicable
Days for Computation of Interest.
Computations
of interest on Prime Rate Loans shall be made on the basis of a year of 365/366
days, for the actual number of days (including the first day but excluding
the
last day) occurring in the period for which such interest is payable. All other
computations of interest and all computations of fees shall be made on the
basis
of a year of 360 days, for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest
or
fees are payable.
(d) Unavailable
LIBOR Rate.
Notwithstanding
any election to have interest accrue on any Revolving Loan at the Revolving
LIBOR Rate for an Interest Period pursuant to Section
2.4(b),
if: (i) on or prior to the determination of the Revolving LIBOR Rate
for
such
13
Revolving
Loan, Lender determines (which determination shall be conclusive and binding)
that quotations of interest rates for the relevant deposits are not being
provided in the relevant market in the relevant amount and Interest Period;
or
(ii) on or prior to the first day of an Interest Period, Lender determines
(which determination shall be conclusive and binding) that, as a result of
conditions in or generally affecting the relevant market, the rates of interest
on the basis of which the applicable LIBOR Rate is to be computed do not
accurately reflect the cost to Lender of making or maintaining such Revolving
Loan at the Revolving LIBOR Rate for such Interest Period; then Lender shall
give Borrower prompt notice thereof by telephone and the request by Borrower
to
have interest accrue on such Revolving Loan at the Revolving LIBOR Rate for
such
Interest Period shall not be effective, and such request shall be deemed to
be a
request for interest to accrue on such Revolving Loan at the Revolving Prime
Rate.
(e) Increased
Costs. If,
due to either (i) the introduction after the date of this Agreement
of or
any change after the date of this Agreement (including any change by way of
imposition or increase of reserve requirements or assessments) in or in the
interpretation of any law or regulation or (ii) the compliance with
any
guideline or request issued or made after the date of this Agreement by any
central bank or other governmental authority (whether or not having the force
of
law), there shall be any increase in the cost to Lender of making or maintaining
LIBOR Rate Loans, then Borrower shall from time to time, upon demand by Lender,
pay to Lender additional amounts sufficient to reimburse the Lender for all
such
increased costs. A certificate as to the amount of such increased costs,
submitted to Borrower by Lender, shall be conclusive and binding absent manifest
error.
(f) Increased
Capital Requirements.
If
either, (i) the introduction after the date of this Agreement of, or
the
application after the date of this Agreement as a result of phase-in or
transitional rules of, or any change after the date of this Agreement in or
in
the interpretation of, any law or regulation or (ii) compliance by the
Lender with any guideline or request issued or made after the date of this
Agreement or deemed applicable after the date hereof as a result of phase-in
or
transitional rules by any central bank or other governmental authority (whether
or not having the force of law) affects the amount of capital required to be
maintained by Lender and Lender determines that the amount of such capital
is
increased by or based upon the making of LIBOR Rate Loans pursuant to
Section
2.4(b),
then, upon demand by Lender, Borrower shall immediately pay to Lender, from
time
to time as specified by Lender, additional amounts sufficient to compensate
Lender for the costs of maintaining such increased capital. A certificate as
to
such amounts submitted to Borrower by Lender, shall be conclusive and binding
absent manifest error.
(g) Illegality.
Notwithstanding
any other provision of this Agreement, if the introduction of or any change
in
or in the interpretation of any law or regulation shall make it unlawful, or
any
central bank or other governmental authority shall assert that it is unlawful
for Lender to make or maintain LIBOR Rate Loans, Lender may by notice to
Borrower, suspend the right of the Borrower to elect to have interest accrue
on
any Revolving Loan at the Revolving LIBOR Rate and, if necessary in the
reasonable opinion of Lender to comply with such law or regulation, convert
all
outstanding Revolving Loans bearing interest at the Revolving LIBOR Rate to
Revolving Loans bearing interest at the Revolving Prime Rate, at the latest
time
permitted by the applicable law or regulation.
14
Section
2.5 Notes;
Recordation of Loans.
(a) Notes.
The
Loans made hereunder shall be evidenced by promissory notes of Borrower dated
as
of the date hereof payable to the order of Lender as follows: (i) the
Revolving Loans by a promissory note substantially in the form attached hereto
as Exhibit A-1
in the face amount of the Revolving Commitment Amount (the “Revolving
Note”);
and (ii) the Term Loan by a promissory note substantially in the form
attached hereto as Exhibit A-2
in the face amount of Four Million Dollars ($4,000,000) (the “Term
Note”).
The Revolving Note and the Term Note are referred to herein each as a
“Note”
and collectively as the “Notes.”
(b) Recordation
of Loans.
Lender
is hereby authorized to record the date and amount of the Loans it makes, the
Prime Rate, and the date and amount of each payment of principal and interest
thereon on a schedule annexed to or kept in respect of any Note. Any such
recordation by Lender shall constitute prima
facie
evidence of the accuracy of the information so recorded; provided,
however,
that the failure to make any such recordation or any error in any such
recordation shall not affect the obligations of Borrower hereunder or under
any
Note.
Section
2.6 Manner
of Payments.
(a) Form
and Place of Payment.
All
payments of principal and interest on any Loan and all other amounts payable
hereunder or under any other Loan Document by Borrower to Lender shall be made
by paying the same in United States Dollars and in immediately available funds
to Lender at its main office, Walla Walla, Washington, not later than 2:00
p.m.
(Walla Walla time) on the date on which such payment shall become due. If such
payment is received after 2:00 p.m., then it will be deemed received on the
next
Business Day. All payments to be made by Borrower shall be made without set-off,
recoupment or counterclaim.
(b) Authorization
to Charge Borrower’s Account.
On
each date when the payment of any principal, interest or commitment fees are
due
hereunder or under any Note, Borrower agrees to maintain on deposit in an
ordinary checking account maintained by Borrower with Lender (as such account
shall be designated by Borrower in a written notice to Lender from time to
time,
the “Borrower
Account”)
an amount sufficient to pay such principal, interest or commitment fees in
full.
Borrower hereby authorizes Lender (i) to deduct automatically all
principal, interest or commitment fees when due hereunder or under the Notes
from the Borrower Account, and (ii) if and to the extent any payment
under
this Agreement or any other Loan Document is not made when due, to deduct
automatically any such amount from any or all of the accounts of Borrower
maintained with Lender. Lender agrees to provide timely notice to Borrower
of
any automatic deduction made pursuant to this Section
2.6(b).
(c) Non-Business
Days.
Whenever
any payment hereunder or under any other Loan Document shall be stated to be
due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation and payment of interest or commitment fees, as
the
case may be. Notwithstanding the foregoing (i) any Interest Period that
would otherwise end on a day that is not a Business Day shall be extended to
the
next succeeding Business Day unless, such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next
15
preceding
Business Day and (ii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar month at the end of such
Interest Period.
Section 2.7 Prepayments.
Prime
Rate Loans may be repaid at any time without penalty or premium. Borrower
acknowledges and agrees that payment of a LIBOR Rate Loan prior to the end
of
its Interest Period is prohibited. If, at Lender’s sole and absolute discretion,
prepayment of a LIBOR Rate Loan is permitted, Borrower agrees to reimburse
Lender for any costs incurred in breaking such LIBOR Rate Loan prior to the
end
of its Interest Period. A certificate as to such amounts submitted to Borrower
by Lender, shall be conclusive and binding absent manifest error.
Section
2.8 Application
of Payments.
(a)
Payments
Before Default.
Payments
made by Borrower in respect of amounts owing by it hereunder or under any other
Loan Document shall be applied in the manner directed by Borrower and, in the
absence of any such direction, such payments shall be applied first,
against fees, expenses and indemnities due hereunder or under any other Loan
Document; second,
against any interest due on any Revolving Loan or the Term Loan; third,
against any Term Loan principal then due; fourth,
against any principal on the Revolving Loans bearing interest at the Revolving
Prime Rate until all such Revolving Loans are paid in full; fifth,
against any principal on the LIBOR Rate Loans until all such LIBOR Rate Loans
are paid in full; and, thereafter, to Term Loan principal not then due (applied
to Borrower’s obligations in the inverse order of maturity).
(b)
Payments
After Default.
Any
payments received by Lender by any means and from any source after the
occurrence and during the continuation of an Event of Default shall be applied
against any Financial Transaction Liability of Borrower and to such portions
of
Borrower’s obligations under the Loan Documents and in such order as Lender may
elect in its sole discretion.
Section
2.9 Unused
Commitment Fees.
So
long as Lender shall have any commitment to make Revolving Loans hereunder
and,
until payment in full of each Revolving Loan, Borrower agrees to pay to Lender,
an unused commitment fee computed daily at a per annum rate equal to one eighth
of one percent (0.125%) on the actual daily difference between the Credit
Utilization and the Revolving Commitment Amount. Unused commitment fees shall
be
payable in arrears on the first Business Day following the last Business Day
of
each fiscal quarter of Borrower, on the Revolving Maturity Date, and on demand
after the occurrence of an Event of Default.
ARTICLE
3
CONDITIONS
TO LENDING
Section
3.1 Conditions
to Initial Loan.
In
addition to the conditions set forth in Section
3.2,
the obligation of Lender on or after the date of this Agreement to make the
initial Loan hereunder is subject to fulfillment of the following conditions
precedent:
16
(a) Loan
Documents.
The
Loan Documents shall have each been duly executed and delivered by the
respective parties thereto, and shall be satisfactory to Lender in form and
substance.
(b) Borrower
Authority.
Lender
shall have received, in form and substance satisfactory to it, a certified
copy
of the Articles of Incorporation and Bylaws of Borrower and certified copies
of
resolutions adopted by the Board of Directors of Borrower authorizing the
execution, delivery and performance of the Loan Documents to which it is a
party, together with evidence that Borrower is in good standing in the states
of
Washington and Oregon and evidence of the authority and specimen signatures
of
the natural persons who have signed this Agreement and who will sign the other
Loan Documents on behalf of Borrower and such other evidence of corporate
authority as Lender shall reasonably require.
(c) Certificate.
Lender
shall have received an Officer’s Certificate from Borrower as to the accuracy of
Borrower’s representations and warranties set forth in Article 4
and as to the absence of any Default or Event of Default.
(d) Loan
Fee.
Lender
shall have received from Borrower payment of a loan commitment fee in the amount
of Twelve Thousand Five Hundred Dollars ($12,500) in respect of Lender’s
agreement to enter into this Agreement. The loan fee payable under this
subsection (d) shall be deemed fully earned when due and non-refundable
when paid.
(e) Evidence
of Security
.
Lender shall have received evidence satisfactory to it that the security
interests created by the Security Documents have been duly perfected by all
such
means as Lender may deem necessary or advisable to create a valid and perfected
Lien in the Collateral enforceable against all third parties in all
jurisdictions of the United States and Canada to secure all obligations of
Borrower to Lender under this Agreement or the other Loan Documents. Lender
shall have also received such evidence as it may require that its security
interests in the Collateral have priority over any and all other security
interests or other Liens therein and that the Collateral is free and clear
of
all Liens, except as expressly permitted by this Agreement.
(f) Evidence
of Insurance.
Lender
shall have received evidence satisfactory to it that all insurance required
by
this Agreement or any Security Document is in full force and
effect.
(g) Consents.
Lender
shall have received evidence reasonably satisfactory to it that Borrower has
obtained all consents, permits and Government Approvals from all Persons
(including, without limitation, Governmental Authorities) which are parties
to
or the issuer of any material contract, lease, license or other Government
Approval necessary or advisable to permit Lender following any Event of Default,
to enjoy the practical realization of the rights and remedies provided in the
Security Documents.
Section
3.2
Conditions
to All Loans.
The
obligation of Lender on or after the date of this Agreement to make any Loan
is
subject to fulfillment of the following conditions precedent:
(a) Prior
Conditions.
All
of the conditions set forth in Section
3.1
shall have been satisfied.
17
(b) Notice
of Borrowing.
Lender
shall have received a Notice of Borrowing in respect of such Loan.
(c) No
Default.
At
the date of the Loan, no Default or Event of Default shall have occurred and
be
continuing or will have occurred as the result of the making of the Loan; and
the statements set forth in Article 4
hereof are true and correct in all material respects (subject to any waivers
of
the terms thereof then in effect in accordance with the terms of this Agreement)
on and as of such date with the same force and effect as if made on and as
of
such date.
(d) Other
Information.
Lender
shall have received such other statements, opinions, certificates, documents
and
information as it may reasonably request in order to satisfy itself that the
conditions set forth in this Section
3.2
have been fulfilled.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES
Borrower
represents and warrants to Lender as follows:
Section
4.1 Existence
and Power.
Borrower
is a corporation duly incorporated, validly existing under the laws of the
State
of Oregon. Borrower is duly qualified to do business in the State of Washington
and each other jurisdiction where the failure to so qualify would be likely
to
have a material adverse effect on the business, operations, properties or
financial condition of Borrower. Borrower has full corporate power, authority
and legal right to carry on its business as presently conducted, to own and
operate its properties and assets, and to execute, deliver and perform this
Agreement and the other Loan Documents.
Section
4.2 Authorization.
The
execution, delivery and performance by Borrower of this Agreement and the other
Loan Documents and any borrowing hereunder or thereunder have been duly
authorized by all necessary corporate action of Borrower, do not require any
shareholder approval or the approval or consent of any trustee or the holders
of
any Indebtedness of Borrower, except such as have been obtained (certified
copies thereof having been delivered to Lender), do not contravene any law,
regulation, rule or order binding on it or its Articles of Incorporation or
Bylaws and do not contravene the provisions of or constitute a default under
any
material indenture, mortgage, contract or other agreement or instrument to
which
Borrower is a party or by which Borrower or any of its properties may be bound
or affected, except that the leases listed on Part (b) of Schedule 2
attached hereto restrict Borrower’s ability to permit liens or encumbrances on
certain items, including, but not limited to, the premises, improvements, and
the lease agreement.
Section
4.3 Government
Approvals, Etc.
No
Government Approval or filing or registration with any Governmental Authority
is
required for the making and performance by Borrower of the Loan Documents or
in
connection with any of the transactions contemplated hereby or thereby, except
such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to Lender).
Section
4.4 Binding
Obligations, Etc.
This Agreement has been duly executed and delivered by Borrower and constitutes,
and the other Loan Documents when duly executed and
18
delivered
will constitute, the legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
similar laws affecting creditors’ rights generally or general principles of
equity.
Section
4.5 Litigation.
Except
as specifically disclosed in Schedule 1
attached hereto, there are no actions, proceedings, investigations, or claims
against or affecting Borrower or any Subsidiary now pending before any court,
arbitrator, or Governmental Authority (nor to the best of Borrower’s knowledge
has any thereof been threatened nor does any basis exist therefor) which if
determined adversely to Borrower or such Subsidiary would (a) have a
material adverse effect on the financial condition or operations of Borrower,
or
Borrower and its Subsidiaries on a consolidated basis, (b) impair or
defeat
the Lien of Lender on any of the Collateral or any rights of Borrower therein,
or (c) result in a judgment or order against Borrower or any Subsidiary
(in
excess of insurance coverage) for more than Two Hundred Fifty Thousand Dollars
($250,000) in any one case or Five Hundred Thousand Dollars ($500,000) in the
aggregate.
Section
4.6 Financial
Condition.
The
consolidated balance sheet of Borrower as at September 30, 2004 and
the
related statements of consolidated income and retained earnings of Borrower
for
the fiscal year then ended, and the consolidated balance sheet of Borrower
as at
March 31, 2005 (the “Current
Balance Sheet”),
and the related statements of consolidated income and retained earnings of
Borrower for the two fiscal quarters then ended, copies of which have been
furnished to Lender, fairly present the consolidated financial condition of
Borrower as at such dates, all determined in accordance with GAAP. Neither
Borrower nor any Subsidiary had on such dates any material contingent
liabilities for Taxes, unusual forward or long-term commitments or material
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in such balance sheet and in the
related notes. Since March 31, 2002 there has been no material adverse
change in the financial condition, operations, or business of Borrower, or
Borrower and its Subsidiaries on a consolidated basis.
Section
4.7 Title
and Liens.
Borrower
has good and marketable title to each of the properties and assets reflected
in
the Current Balance Sheet, except such as have been since sold or otherwise
disposed of in the ordinary course of business. No assets or revenues of
Borrower are subject to any Lien except as required or permitted by this
Agreement or specifically disclosed in Schedule 2
attached hereto.
Section
4.8 Intellectual
Property.
Borrower
and each Subsidiary own or possesses all Intellectual Property and all licenses,
franchises, permits and rights with respect to any Intellectual Property
necessary to own and operate its respective properties and to carry on their
respective businesses as presently conducted and presently planned to be
conducted. Except as specifically disclosed in Schedule 3
attached hereto, no claim or litigation regarding any such Intellectual Property
or any such license, franchise, permit or other rights with respect thereto
is
pending (nor to the best of Borrower’s knowledge threatened) which if determined
adversely to Borrower or any Subsidiary would have a material adverse effect
on
the business, operations or financial condition of Borrower, or Borrower and
its
Subsidiaries on a consolidated basis.
Section
4.9 Environmental
Laws, Etc.
Except as specifically disclosed in Schedule 4
attached hereto, all properties of Borrower and each Subsidiary and their use
thereof
19
comply
in all material respects with applicable zoning and use restrictions and with
applicable laws and regulations relating to health, safety and the environment
in all jurisdictions in which Borrower or such Subsidiary is doing business,
except such non-compliance which (if enforced in accordance with applicable
laws
and regulations and determined adversely to Borrower or such Subsidiary) could
not, individually or in the aggregate, reasonably be expected to give rise
to
legal liability in excess of Two Hundred Fifty Thousand Dollars ($250,000)
(the
“Threshold
Amount”).
Without limiting the foregoing, except as specifically disclosed in Schedule 4
attached hereto, no Hazardous Substances have been generated, manufactured,
refined, transferred, stored, treated, transported, handled, managed, discharged
or disposed of, whether by Borrower, any Subsidiary or, to the best of
Borrower’s knowledge after investigation, by any other Person onto, upon, over,
beneath or from any real property owned by Borrower or any Subsidiary or other
premises owned, leased, operated, used or held at any time by Borrower or any
Subsidiary or any of the ground water beneath any such premises (collectively,
the “Premises”)
which in any fashion might result in Borrower, any Subsidiary or Lender
incurring or suffering at any time any loss, liability, damages, or obligations
including liability for cleanup and recovery costs and expenses which,
individually or in the aggregate, could reasonably be expected to exceed the
Threshold Amount. Except as specifically disclosed in Schedule 4
attached hereto, there are no underground storage tanks, whether in current
use
or not, at any of the Premises and to the best of Borrower’s knowledge, no such
tanks have ever been maintained on the Premises. There are no past or present
events, conditions, circumstances, activities, practices, incidents or actions
at or in connection with the Premises which could reasonably be expected to
interfere with or prevent continued compliance with any laws or regulations
pertaining to underground storage tanks or any other laws or regulations
relating to the emission, discharge, release or threatened release of Hazardous
Substances into the environment or give rise to any legal liability or otherwise
form the basis of any claim, action, suit, proceedings, hearing or investigation
against or affecting Borrower or any Subsidiary under the Environmental Laws
that could, individually or in the aggregate, reasonably be expected to give
rise to legal liability in excess of the Threshold Amount. Except as
specifically disclosed in Schedule 4
attached hereto, there has been no disposal from the Premises by Borrower or
any
Subsidiary (or to the best of Borrower’s knowledge, by any other Person)
directly or indirectly of any Hazardous Substances to, on or in any site
currently listed or formally proposed to be listed on the National Priorities
List under Superfund or any site listed on any priority cleanup list compiled
by
any state department of ecology or environmental quality. Except as specifically
disclosed in Schedule
4
attached hereto, neither Borrower nor any Subsidiary has or will be involved
in
any operations at or near the Premises, which operations, when conducted in
accordance with applicable law, could reasonably be expected to lead to:
(a) the imposition of legal liability under Environmental Laws on Borrower,
any Subsidiary or any subsequent owner of the Premises in excess of the
Threshold Amount or (b) the creation of a Lien on the Premises under
Environmental Laws, the creation of which could have an adverse effect upon
the
perfection or priority of any Lien granted under any of the Security
Documents.
Section
4.10 Taxes.
Borrower
and each Subsidiary have each filed all tax returns and reports required of
them, has paid all Taxes which are due and payable and before they have become
delinquent, except for Taxes (a) whose amount is not individually or
in the
aggregate for Borrower or any Subsidiary, as applicable, a Material Amount,
or
(b) whose amount, applicability or validity is currently being contested
in
good faith by appropriate proceedings where reserves or other appropriate
provisions required by GAAP shall have established
20
therefor.
The charges, accruals and reserves on the books of Borrower and each Subsidiary
in respect of Taxes for all fiscal periods to date are accurate in all material
respects. There are no material questions or disputes between Borrower or any
Subsidiary and any Governmental Authority with respect to any Taxes. As used
in
this Section
4.10,
“Material
Amount”
shall mean for any Person, an amount of Two Hundred Fifty Thousand Dollars
($250,000) or more or an amount otherwise material to the business, operations
or financial condition of such Person.
Section
4.11 Other
Agreements.
Neither
Borrower nor any Subsidiary is in breach of or default in any material respect
under any material agreement to which it is a party or which is binding on
it or
any of its assets.
Section
4.12 Labor
Matters.
Neither
Borrower nor any Subsidiary is involved in any labor controversy which has
resulted in or, to Borrower’s knowledge, threatens to result in a strike which
would have a material adverse effect on the business, operations or financial
condition of Borrower, or Borrower and its Subsidiaries on a consolidated
basis.
Section
4.13 Federal
Reserve Regulations.
Neither Borrower nor any Subsidiary is engaged principally or as one
of
its important activities in the business of extending credit for the purpose
of
purchasing or carrying any margin stock (within the meaning of Federal Reserve
Regulation U), and no part of the proceeds of any Loan will be used to purchase
or carry any such margin stock or to extend credit to others for the purpose
of
purchasing or carrying any such margin stock or for any other purpose that
violates the applicable provisions of any Federal Reserve Regulation. Borrower
will furnish to Lender on request a statement conforming with the requirements
of Regulation U.
Section
4.14 ERISA.
(a) The
present value of all benefits vested under all Pension Plans did not, as of
the
most recent valuation date of such Pension Plans, exceed the value of the assets
of the Pension Plans allocable to such vested benefits by an amount which would
represent a potential material liability of Borrower or affect materially the
ability of Borrower to perform the Loan Documents.
(b) No
Plan or trust created thereunder, or any trustee or administrator thereof,
has
engaged in a “prohibited transaction” (as such term is defined in Section 406 of
ERISA or Section 4975 of the Code) which could subject such Plan or any other
Plan, any trust created thereunder, or any trustee or administrator thereof,
or
any party dealing with any Plan or any such trust to the tax or penalty on
prohibited transactions imposed by Section 502 of ERISA or Section 4975 of
the
Code.
(c) No
Pension Plan or trust has been terminated, except in accordance with the Code,
ERISA, and the regulations of the Internal Revenue Service and the PBGC as
applicable to solvent plans in which benefits of participants are fully
protected. No “reportable event” as defined in Section 4043 of ERISA has
occurred for which notice has not been waived or for which alternative notice
procedures are permitted.
(d) No
Pension Plan or trust created thereunder has incurred any “accumulated funding
deficiency” (as such term is defined in Section 302 of ERISA) whether or not
waived, since the effective date of ERISA.
21
(e) The
required allocations and contributions to Pension Plans will not violate Section
415 of the Code.
(f) Borrower
has no withdrawal liability to any trust created pursuant to a multi-employer
pension or benefit plan nor would it be subject to any such withdrawal liability
in excess of Two Hundred Fifty Thousand Dollars ($250,000) if it withdrew from
any such plan or if its participation therein were otherwise
terminated.
Section
4.15 Subsidiaries.
As
of the date of this Agreement, Schedule 5
attached hereto accurately sets forth each Subsidiary of Borrower, the type
of
legal entity of each such Subsidiary, its jurisdiction of incorporation or
organization, and the ownership and percentage ownership of each such
Subsidiary.
Section
4.16 Not
Investment Company, Etc. Borrower
is not now, and after the application by Borrower of the proceeds of any Loan
will not be, subject to regulation under the Investment Company Act of 1940,
the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code or any federal or
state
statute or regulation limiting its ability to incur Indebtedness.
Section
4.17 Representations
as a Whole.
This
Agreement, the other Loan Documents, the financial statements referred to in
Section
4.6,
and all other instruments, documents, certificates and statements furnished
to
Lender by or on behalf of Borrower, taken as a whole and as of the date given,
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. Borrower has disclosed to Lender in writing any and all facts known
to Borrower which have a material adverse effect on the business, operations,
properties, financial condition or prospects of Borrower or the ability of
Borrower to perform its obligations under the Loan Documents. Without limiting
the foregoing, each of the representations and warranties made by Borrower
herein and in the other Loan Documents is true and correct in all material
respects on and as of the date when made, on and as of the date hereof, and
on
and as of each date this representation is deemed made hereunder with the same
force and effect as if made on and as of such dates.
ARTICLE
5
AFFIRMATIVE
COVENANTS
So
long as Lender shall have any Commitment hereunder and until payment in full
of
each Loan and performance of all other obligations of Borrower under this
Agreement and the other Loan Documents, Borrower agrees to do all of the
following unless Lender shall otherwise consent in writing.
Section
5.1 Use
of Proceeds.
The
proceeds of the Revolving Loans and the Term Loan will be used solely to repay
Indebtedness of Borrower arising under the Existing Credit Agreement and to
fund
Borrower’s working capital needs.
Section
5.2 Payment.
Borrower
will pay the principal of and interest on the Loans in accordance with the
terms
of this Agreement and the Notes and will pay when due all other amounts payable
by Borrower hereunder and under any other Loan Document.
22
Section
5.3 Preservation
of Corporate Existence, Etc. Borrower
will, and will cause each Subsidiary to, preserve and maintain its corporate,
limited liability company or partnership existence, rights, franchises and
privileges in the jurisdiction of its incorporation or organization and qualify
and remain qualified as a foreign corporation, limited liability company or
partnership in each jurisdiction where such qualification is necessary or
advisable in view of the business and operations of Borrower or such Subsidiary
or the ownership of its properties.
Section
5.4 Visitation
Rights.
Borrower
will permit Lender at any reasonable time, and from time to time, to examine
and
make copies of and abstracts from the records and books of account of and to
visit the properties of Borrower and any Subsidiary and to discuss the affairs,
finances and accounts of Borrower with any of its officers or
directors.
Section
5.5 Keeping
of Books and Records.
Borrower
will keep adequate records and books of account in which complete entries will
be made, in accordance with GAAP, reflecting all financial transactions of
Borrower.
Section
5.6 Maintenance
of Property, Etc.
Borrower
will, and will cause each Subsidiary to, maintain and preserve all of its
material properties in good working order and condition, ordinary wear and
tear
excepted, and will from time to time make all needed repairs, renewals, or
replacements so that the efficiency of such properties shall be fully maintained
and preserved. Borrower will, and will cause each Subsidiary to, not take or
fail to take any action, nor permit any action to be taken by others that are
subject to Borrower’s or such Subsidiary’s control which would affect the
validity and enforcement of its and their Intellectual Property, or impair
the
value of such Intellectual Property.
Section
5.7 Compliance
With Laws, Etc.
Borrower will, and will cause each Subsidiary to, comply in all material
respects with all laws, regulations, rules, and orders of Governmental
Authorities applicable to Borrower, any Subsidiary or to its operations or
property, except any thereof whose validity is being contested in good faith
by
appropriate proceedings, so long as (a) such contest proceedings operate
to
stay the execution of the enforcement thereof and (b) adequate reserves
or
other appropriate provision, as shall be required in conformity with GAAP shall
have been made for the payment of any fines, charges, penalties or other costs
in respect thereof in the event the contest is determined adversely to Borrower
or such Subsidiary.
Section
5.8 Other
Obligations.
Borrower
will pay and discharge and will cause each Subsidiary to pay and discharge
before the same shall become delinquent all Indebtedness, Taxes, and other
obligations for which Borrower or any Subsidiary is liable or to which its
income or property is subject and all claims for labor and materials or supplies
which, if unpaid, might become by law a lien upon assets of Borrower or any
Subsidiary, except any thereof whose validity, applicability or amount is being
contested in good faith by Borrower or such Subsidiary in appropriate
proceedings, so long as adequate reserves or other appropriate provision, as
shall be required in conformity with GAAP shall have been made for the payment
thereof in the event the contest is determined adversely to Borrower or such
Subsidiary.
Section
5.9 Insurance.
Borrower
will, and will cause each Subsidiary to, keep in force upon all of its and
their
properties and operations policies of insurance carried with
23
responsible
companies in such amounts and covering all such risks as shall be customary
in
the industry and as shall be reasonably satisfactory to Lender. From time to
time, on request, Borrower will furnish to Lender certificates of insurance
or,
at Lender’s request, duplicate policies evidencing such coverage.
Section
5.10 Borrower
Financial Information.
Borrower
will deliver to Lender:
(a) Annual
Audited Financial Statements.
As
soon as available and in any event within ninety (90) days after the end of
each
fiscal year of Borrower the consolidated financial statements of Borrower as
of
the end of such fiscal year, accompanied by an audit report thereon by
independent certified public accountants selected by Borrower and reasonably
satisfactory to Lender (which report shall be prepared in accordance with GAAP
and shall not be qualified by reason of restricted or limited examination of
any
material portion of the records of Borrower and shall contain no disclaimer
of
opinion or adverse opinion).
(b) Monthly
Unaudited Financial Statements.
As
soon as available and in any event within thirty (30) days after the end of
each
month, company prepared consolidated financial statements of Borrower as of
the
end of such month (including the fiscal year to the end of such month),
accompanied by an Officer’s Certificate of Borrower certifying that such
unaudited financial statements have been prepared in conformity with GAAP
(subject to year-end audit adjustments and the absence of footnote disclosures)
and, in all material respects, present fairly the consolidated financial
position and the results of operations of Borrower as at the end of and for
such
month (subject to year-end audit adjustments) and identifying any material
adverse changes in the financial condition or operations of Borrower that have
occurred since the last delivered fiscal year-end report referred to in
subsection (a) above.
(c) Monthly
Compliance Certificates.
Together
with the delivery of the financial statements referred to in
subsections (a) and (b) above, an Officer’s Certificate of Borrower
(i) stating that as of the close of such fiscal year or month, as
applicable, no Default or Event of Default had occurred and was continuing,
and
(ii) demonstrating with calculations in reasonable detail Borrower’s
compliance as at that date with the provisions of Section
5.14.
(d) Reports
to Stockholders.
As
soon as available, all reports sent by Borrower to its stockholders generally
and all quarterly and annual reports and registration statements filed by
Borrower with the Securities and Exchange Commission.
(e) Other.
All
other statements, reports and other information as Lender may reasonably request
concerning the financial condition and business affairs of
Borrower.
Section
5.11 Notification.
Promptly
after learning thereof, Borrower shall notify Lender of (a) any action,
proceeding, investigation or claim against or affecting Borrower or any
Subsidiary instituted before any court, arbitrator or Governmental Authority
or,
to Borrower’s knowledge threatened to be instituted, which if determined
adversely to Borrower or such Subsidiary would be likely to have a material
adverse effect on the business, operations, properties, financial condition
or
prospects of Borrower, or Borrower and its Subsidiaries on a consolidated basis,
or to impair or defeat the Lien of Lender on any Collateral or Borrower’s rights
therein, or to result in a judgment or order against Borrower or any Subsidiary
(in excess
24
of
insurance coverage) for more than Fifty Thousand Dollars ($50,000); (b) any
substantial dispute between Borrower or any Subsidiary and any Governmental
Authority; (c) any labor controversy which has resulted in or, to
Borrower’s knowledge, threatens to result in a strike which would materially
affect the business operations of Borrower or any Subsidiary; (d) if
Borrower or any member of a Controlled Group gives or is required to give notice
to the PBGC of any “reportable event” (as defined in subsections (b)(1), (2),
(5) or (6) of Section 4043 of ERISA) with respect to any Plan (or the Internal
Revenue Service gives notice to the PBGC of any “reportable event” as defined in
subsection (c)(2) of Section 4043 of ERISA and Borrower obtains knowledge
thereof) which might constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan
has
given or is required to give notice of any such report-able event, a copy of
the
notice of such reportable event given or required to be given to the PBGC;
(e) the occurrence of any Event of Default or Default; and (f) the
occurrence of an event which results in a material adverse change in the
business, operations, properties, financial condition or prospects of Borrower,
or Borrower and its Subsidiaries on a consolidated basis. In the case of the
occurrence of an Event of Default or Default or the occurrence of an event
which
results in a material adverse change in Borrower’s consolidated financial
condition or operations, Borrower will deliver to Lender an Officer’s
Certificate specifying the nature thereof, the period of existence thereof,
if
applicable, and what action Borrower proposes to take with respect
thereto.
Section
5.12 Payment
of Expenses.
Borrower
shall, on demand pay to Lender all costs, expenses and fees, including without
limitation reasonable attorneys’ fees (including allocated costs of in-house
counsel), incurred by Lender in connection with the negotiation and preparation
of this Agreement and the other Loan Documents and any other document,
agreement, opinion or certificate related to the foregoing.
Section
5.13 Additional
Payments; Additional Acts.
From
time to time, Borrower will (a) pay or reimburse Lender on request for
all
Taxes (other than Taxes imposed on the net income or gross revenues of Lender)
imposed on any Loan Document or payment and for all reasonable expenses,
including legal fees (including allocated costs of in-house counsel), incurred
by Lender in connection with the making or administering of the Loans,
(b) pay or reimburse Lender on request for all reasonable expenses incurred
by Lender in connection with conducting field audits or inspections of the
Collateral; (c) pay or reimburse Lender for all reasonable expenses,
including legal fees, incurred by Lender in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement and each other Loan Document (including all such costs and expenses
incurred during any “workout” or restructuring in respect of the Loans and
during any legal proceeding, including any proceeding under the Bankruptcy
Code
or under any other applicable bankruptcy, insolvency or similar law affecting
the rights of creditors generally of the United States or any State thereof;
(d) if requested by Lender, obtain and promptly furnish to Lender evidence
of all such Government Approvals as may be required to enable Borrower to comply
with its obligations under the Loan Documents and to continue in business as
conducted on the date hereof without material interruption or interference;
(e) execute and deliver all such instruments and to perform all such
other
acts as Lender may reasonably request to carry out the transactions contemplated
by this Agreement and the other Loan Documents and to maintain the continuous
perfection and priority of Lender’s Lien on all Collateral. If Borrower shall
default in its obligations to reimburse Lender, interest shall accrue on the
unpaid amount thereof at a per
25
annum
rate equal to five percent (5%) above the Prime Rate (changing as such Prime
Rate changes) from the date Lender makes demand therefor until repaid in full
by
Borrower. The obligations of Borrower under this Section shall survive the
payment of the Loans and the termination of this Agreement.
Section
5.14 Financial
Covenants.
(a) Debt
to Tangible Net Worth Ratio.
Borrower
shall maintain on a consolidated basis as of the end of each month, a ratio
of
Indebtedness to Tangible Net Worth equal to or less than 1.5 to 1.
(b) Fixed
Charge Coverage Ratio.
Borrower
shall maintain on a consolidated basis, as of the end of each fiscal quarter
of
Borrower on which date Borrower holds cash and Cash Equivalents of less than
Four Million Dollars ($4,000,000), a Fixed Charge Coverage Ratio equal to or
greater than 2.0 to 1. As used herein, “Fixed
Charge Coverage Ratio”
shall mean, as of any date of determination, for the period of four consecutive
fiscal quarters then ended, the ratio of (i) EBITDA of Borrower and
its
Subsidiaries for such period to (ii) the sum of (A) regularly
scheduled principal payments required to be made by Borrower and its
Subsidiaries on Funded Debt during such period, plus
(B) interest expense (exclusive of interest income) of the Borrower
and its
Subsidiaries (including capitalized interest) and the interest component of
rentals paid or accrued under Capital Leases for such period determined in
accordance with GAAP plus
(C) Unfunded Capital Expenditures made by the Borrower and its Subsidiaries
during such period plus
(D) dividends (except dividends payable in its capital stock) paid on
any
shares of any class of Borrower’s capital stock, in each case during such
period.
(c) Minimum
Net Income.
Borrower
shall maintain on a consolidated basis as of the end of each fiscal quarter
of
Borrower, net income of not less than Zero Dollars ($0) for the for the period
of four (4) consecutive fiscal quarters then ended, in each case determined
in
accordance with GAAP for such period, excluding, to the extent deducted in
determining such net income, any write-offs of goodwill during such
period.
ARTICLE
6
NEGATIVE
COVENANTS
So
long as Lender shall have any Commitment hereunder and until payment in full
of
each Loan and performance of all other obligations of Borrower under this
Agreement and the other Loan Documents, Borrower agrees that it will not do
any
of the following unless Lender shall otherwise consent in writing.
Section
6.1 Dividends.
Borrower
shall not, and shall cause each Subsidiary to not declare or pay any dividend
(except dividends payable in its capital stock) on any shares of any class
of
Borrower’s or any Subsidiary’s capital stock or apply any assets to the
purchase, redemption or other retirement of, or set aside any sum for the
payment of any dividends on or for the purchase, redemption or other retirement
of, or make any other distribution by reduction of capital or otherwise in
respect of, any shares of any class of capital stock of Borrower or any
Subsidiary, except (i) dividends and other distribution by any Subsidiary
to Borrower or any wholly-owned Subsidiary of Borrower; and
(ii) redemptions of Series B Preferred Stock and
26
warrants
that, by their terms, can be put to Borrower for redemption not exceed the
aggregate sum of Twelve Million Three Hundred Thousand Dollars
($12,300,000).
Section
6.2 Liquidation,
Merger, Sale of Assets.
Borrower
shall not, and shall cause each Subsidiary to not, merge or liquidate, dissolve
or enter into any consolidation, joint venture, partnership or other combination
nor sell, lease or dispose of all or any portion of its assets or of any
Collateral other than sales of inventory in the ordinary course of
business.
Section
6.3 Indebtedness.
Borrower
shall not, and shall cause each Subsidiary to not create, incur or become liable
for any Indebtedness except: (a) the Loans; (b) existing Indebtedness
reflected on the Current Balance Sheet or specifically disclosed in Schedule 6
attached hereto, including any renewal, extension, refinancing in whole or
in
part or replacement of any such Indebtedness; provided
that (i) the maturity date is not earlier than the Indebtedness renewed,
extended, refinanced or replaced, and (ii) the principal amount thereof
is
not increased; (c) current accounts payable or accrued expenses incurred
by
Borrower or such Subsidiary in the ordinary course of business;
(d) Indebtedness for obligations under Capital Leases and Indebtedness
secured by Purchase Money Liens not to exceed the aggregate principal amount
of
Five Hundred Thousand Dollars ($500,000) at any time outstanding;
(e) Indebtedness permitted under Section
6.4;
(f) Indebtedness of Key Technology BV arising under the BV Credit Facility
not to exceed the aggregate principal amount of Three Million Four Hundred
Thousand Euros (€3,400,0000) at any time outstanding; (g) Indebtedness of
Borrower or a Subsidiary with respect to which Borrower or such Subsidiary
and
the party to whom the Indebtedness is owed have executed and delivered a
subordination agreement in favor of Lender in form and substance satisfactory
to
Lender; (h) inter-company Indebtedness owing by any Subsidiary to Borrower
not to exceed the aggregate principal amount of Six Million Dollars
($6,000,000); and (i) other Indebtedness not to exceed the aggregate
principal amount of Two Hundred Fifty Thousand Dollars ($250,000) at any time
outstanding.
Section
6.4 Guaranties,
Etc.
Borrower shall not, and shall cause each Subsidiary to not assume, guaranty,
endorse or otherwise become directly or contingently liable for, nor obligated
to purchase, pay or provide funds for payment of, any obligation or Indebtedness
of any other Person, except: (a) by endorsement of negotiable instruments
for deposit or collection or by similar transactions in the ordinary course
of
business; (b) with respect to customary indemnification obligations
incurred in connection title insurance agreements; (c) guaranty obligations
of Borrower with respect to customer deposits received by Borrower or a
Subsidiary; provided
that (i) the amount of any one guaranty does not exceed the amount of
the
customer deposit received by Borrower or such Subsidiary in connection with
the
sale for which such guaranty was made and (ii) the aggregate U.S. Dollar
equivalent amount of all such guaranties does not exceed the principal amount
of
Five Hundred Thousand Dollars ($500,000) at any time outstanding; and
(d) other contingent obligations that do not exceed the aggregate sum
of
One Hundred Thousand Dollars ($100,000) at any time outstanding.
Section
6.5 Liens.
Borrower
shall not, and shall cause each Subsidiary to not create, assume or suffer
to
exist any Lien on any of its assets except: (a) existing Liens reflected
on
the Current Balance Sheet or specifically disclosed in Schedule 2
attached hereto; (b) Liens in favor of Lender arising pursuant to the
Security Documents; (c) Permitted Liens; (d) Liens securing
Indebtedness under Capital Leases and Purchase Money Liens securing
Indebtedness, in each
27
case
permitted under Section
6.3;
(e) Liens on the assets and properties of Key Technology BV securing
Indebtedness of Key Technology BV permitted under Section
6.3;
(f) Liens on the assets and properties of Borrower or a Subsidiary with
respect to which the holder of such Lien has executed and delivered a
subordination agreement in favor of Lender in form and substance satisfactory
to
Lender; and (g) additional Liens which do not at any one time secure
Indebtedness exceeding the aggregate sum of One Hundred Thousand Dollars
($100,000) outstanding at any time.
Section
6.6 Investments.
Borrower
shall not, and shall cause each Subsidiary to not make any loan or advance
to
any Person, establish any subsidiaries, or purchase or otherwise acquire the
capital stock, assets or obligations of, or any interest in, any Person, except:
(a) Cash Equivalents; (b) inter-company loans made by Borrower
to any
wholly-owned Subsidiary; provided
that (i) the aggregate principal amount of all such loans does not exceed
Six Million Dollars ($6,000,000) and (ii) such loans are evidenced by
an
instrument in which Lender has a first priority security interest, duly
perfected by such means as any Lender may deem necessary or advisable;
(c) acquisition by Borrower of its Series B Preferred Stock and warrants
permitted under Section
6.1
and (d) other loans, advances and investments not to exceed One Hundred
Thousand Dollars ($100,000) in the aggregate at any one time
outstanding.
Section
6.7 Operations.
Borrower
shall not, and shall cause each Subsidiary to not engage in any activity which
is substantially different from or unrelated to the present business activities
of Borrower or such Subsidiary nor discontinue any portion of Borrower’s or any
Subsidiary’s present business activities which constitutes a substantial portion
thereof.
Section
6.8 ERISA
Compliance.
Neither
Borrower nor any member of the Controlled Group nor any Plan of any of them
will
(a) engage in any “prohibited transaction” (as such term is defined in §
406 of ERISA or § 4975 of the Code; (b) incur any “accumulated funding
deficiency” (as such term is defined in § 302 of ERISA) whether or not
waived; (c) terminate any Pension Plan in a manner which could result
in
the imposition of a Lien on any property of Borrower or any member of the
Controlled Group pursuant to § 4068 of ERISA; or (d) violate state or
federal securities laws applicable to any Plan.
Section
6.9 Accounting
Change.
Borrower
shall maintain a fiscal year ending on September 30 and shall not make
any
significant change in accounting policies or reporting practices other than
changes required by GAAP or otherwise required by law.
ARTICLE
7
EVENTS
OF DEFAULT
Section
7.1 Events
of Default.
The
occurrence of any of the following events shall constitute an “Event of Default”
hereunder.
(a) Payment
Default.
Borrower
fails to pay (i) within three (3) Business Days after the same becomes
due,
any amount of principal of or interest on any Loan, or (ii) within five
(5)
Business Days after the same becomes due, any other amount payable hereunder
or
under any other Loan Document; or
28
(b) Breach
of Warranty.
Any
representation or warranty made or deemed made by Borrower under or in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made or deemed made; or
(c) Breach
of Certain Covenants.
Borrower
shall have failed to comply with Sections 5.3,
5.7,
5.9,
5.11(e),
5.14,
or Article 6
of this Agreement; or
(d) Breach
of Other Covenants.
Borrower
shall fail to perform or observe any other covenant, obligation or term of
this
Agreement or any other Loan Document and such failure shall continue unremedied
for a period of thirty (30) days after the earlier of (i) the date upon
which written notice thereof shall have been given to Borrower by Lender or
(ii) the date upon which a Responsible Officer of Borrower or any
Subsidiary knew or reasonably should have known of such failure; or
(e) Extraordinary
Situation.
An
event shall occur which results in a material adverse change in Borrower’s
financial condition or operations or an extraordinary situation shall occur
which gives Lender reasonable grounds to believe that Borrower may not, or
will
be unable to, perform or observe in the normal course its obligations under
the
Loan Documents; or
(f) Cross-default.
Borrower
or any Subsidiary shall fail (i) to pay when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) any
Indebtedness or any interest or premium thereon in excess of Two Hundred Fifty
Thousand Dollars ($250,000) and such failure shall continue without waiver
after
the applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness, or (ii) to perform any term or covenant
on
its part to be performed under any agreement or instrument relating to the
Indebtedness described in clause (i) and required to be performed and
such
failure shall continue without waiver after the applicable grace period, if
any,
specified in such agreement or instrument, if the effect of such failure to
perform is to accelerate or to permit the acceleration of the maturity of such
Indebtedness, or (iii) any such Indebtedness shall be declared to be
due
and payable or required to be prepaid (other than by regularly scheduled
required prepayment) prior to the stated maturity thereof; or
(g) Involuntary
Bankruptcy, Etc. (i) A
court of competent jurisdiction shall enter a decree or order for relief in
respect of Borrower or any Subsidiary in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or any other similar relief shall be granted
under any applicable federal or state law, which decree or order is not stayed;
or (ii) an involuntary case shall be commenced against Borrower or any
Subsidiary under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or a decree or order
of a
court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Borrower or any Subsidiary, or over all or a substantial part of
its
property, shall have been entered; or there shall have occurred the involuntary
appointment of an interim receiver, trustee or other custodian of Borrower
or
any Subsidiary for all or a substantial part of its property; or a warrant
of
attachment, execution or similar process shall have been issued against any
substantial part of the
29
property
of Borrower or any Subsidiary, and any such event described in this
clause (ii) shall continue for ninety (90) days without having been
dismissed, bonded, discharged or stayed; or
(h) Voluntary
Bankruptcy, Etc. (i) Borrower
or any Subsidiary shall have an order for relief entered with respect to it
or
shall commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect,
or
shall consent to the entry of an order for relief in an involuntary case, or
to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Borrower or any Subsidiary shall make any assignment for the benefit of
creditors; or (ii) Borrower or any Subsidiary shall be unable, or shall
fail generally, or shall admit in writing its inability, to pay its debts as
such debts become due; or the board of members of Borrower or any Subsidiary
shall adopt any resolution or otherwise authorize any action to approve any
of
the actions referred to herein or in Section
7.1(g);
or
(i) Judgment.
A
final judgment or order for the payment of money in excess of Two Hundred Fifty
Thousand Dollars ($250,000) not covered by insurance or which defeats the lien
of Lender on any Collateral valued at One Hundred Thousand Dollars ($100,000)
or
Borrower’s rights therein shall be rendered against Borrower or any Subsidiary
and such judgment or order shall continue without being discharged, vacated,
bonded or execution thereon stayed pending appeal for a period of thirty (30)
consecutive days; or
(j) ERISA.
Borrower
or any member of the Controlled Group shall fail to pay when due an amount
or
amounts aggregating in excess of Two Hundred Fifty Thousand Dollars ($250,000)
which it shall have become liable to pay to the PBGC or to a Plan under Section
515 of ERISA or Title IV of ERISA; or notice of intent to terminate a Plan
or
Plans (other than a multi-employer plan, as defined in Section 4001(3) of
ERISA), having aggregate Unfunded Vested Liabilities in excess of Two Hundred
Fifty Thousand Dollars ($250,000) shall be filed under Title IV of ERISA by
Borrower, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate any such Plan or Plans; or
(k) Change
in Ownership or Control.
There
occurs an event or series of events by which any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) other than a stockholder of Borrower as of the date of this
Agreement or the spouse or lineal descendant of any such stockholder,
(i) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934) directly or indirectly, of more
than
thirty-five percent (35%) in the aggregate of the equity securities of Borrower
entitled to vote for members of the board of directors of Borrower or
(ii) to the knowledge of Borrower, becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a person or group shall be deemed to have “beneficial ownership” of
all securities that such person or group has the right to acquire, whether
such
right is exercisable immediately or only after the passage of time), directly
or
indirectly, of more than thirty-five percent (35%) in the aggregate of the
equity securities of Borrower entitled to vote for members of the board of
directors of Borrower; or
30
(l) Condemnation.
Such
portion of the properties of Borrower as in the reasonable opinion of Lender
constitutes a substantial portion thereof shall be condemned, seized or
appropriated; or
(m) Governmental
Approvals.
Any
Government Approval or registration or filing with any Governmental Authority
now or hereafter required in connection with the performance by Borrower of
its
obligations set forth in the Loan Documents shall be revoked, withdrawn or
withheld or shall fail to remain in full force and effect unless in the
reasonable opinion of Lender, such revocation, withdrawal or withholding would
not be likely to have a material adverse affect on the ability of Borrower
to
perform its obligations under the Loan Documents; or
(n) Other
Government Action.
Any
act of any Governmental Authority shall, in the reasonable opinion of Lender,
deprive Borrower of any substantial right, privilege, or franchise or
substantially restrict the exercise thereof which deprivation would, in the
reasonable opinion of Lender, be likely to have a material adverse effect on
the
financial condition or operations of Borrower and such act is not revoked or
rescinded within sixty (60) days after it becomes effective or within thirty
(30) days after notice from Lender, whichever first occurs; or
(o) Failure
of Security.
Any
Security Document ceases to be in full force and effect, or is declared by
a
court of competent jurisdiction to be null and void, invalid or unenforceable
in
any respect; or Lender shall not have or shall cease to have a valid and
perfected Lien of first priority (other than Liens expressly permitted to be
prior to such Lien pursuant to the terms of this Agreement) in the Collateral
purported to be covered thereby having a fair market value, individually or
in
the aggregate, exceeding One Hundred Thousand Dollars ($100,000), in each case
for any reason other than (i) the agreement of Lender or the payment
in
full of each Loan, or (ii) an intentional act or omission of Lender
or an
agent of Lender (acting upon the instruction of Lender) or the failure of Lender
to take any action within its exclusive control; or
(p) Invalidity
of Loan Documents.
Any
other Loan Document or any provision thereof, at any time after its execution
and delivery and for any reason other than the agreement of Lender or the
payment in full of each Loan, ceases to be in full force and effect, or is
declared by a court of competent jurisdiction to be null and void, invalid
or
unenforceable in any respect; or Borrower denies that it has any or further
liability or obligation under any other Loan Document, or purports to revoke,
terminate or rescind any Loan Document.
Section
7.2 Consequences
of Default.
(a)
General.
If
any of the Events of Default described in Section
7.1(g)
or Section
7.1(h)
shall occur, the Commitment shall immediately terminate and, if any Loans or
Letters of Credit shall have been made or issued, the principal of and interest
on the Loans, the face amounts of all issued and outstanding Letters of Credit,
and all other sums payable by Borrower under this Agreement and the other Loan
Documents shall become immediately due and payable all without protest,
presentment, notice or demand, all of which Borrower expressly waives. If any
other Event of Default shall occur and be continuing, then in any such case
and
at
31
any
time thereafter so long as any such Event of Default shall be continuing, Lender
may at its option immediately terminate the Commitment and, if any Loans or
Letters of Credit shall have been made or issued, Lender may at its option
declare the principal of and interest on the Loans, the face amounts of all
issued and outstanding Letters of Credit and all other sums payable by Borrower
under this Agreement and the other Loan Documents to be immediately due and
payable, whereupon the same shall become immediately due and payable all without
protest, presentment, notice, or demand, all of which Borrower expressly waives.
The rights and remedies set forth in this Section
7.2
shall be in addition to any and all rights and remedies set forth in the other
Loan Documents.
(b) Cash
Collateral.
Regardless
of whether Borrower’s obligations to repay the Loans and to pay the face amounts
of the Letters of Credit have been accelerated pursuant to the preceding
sentences, Lender may realize on any or all of the Collateral by exercising
any
remedies provided in the Security Documents. Amounts paid or received hereunder
in respect of issued and outstanding Letters of Credit which exceed amounts
paid
by Lender under such Letters of Credit shall be held (and applied) as cash
collateral to secure the performance of all obligations of Borrower owing to
Lender under the Letter of Credit Applications and the other Loan
Documents.
ARTICLE
8
MISCELLANEOUS
Section
8.1 No
Waiver; Remedies Cumulative.
No
failure by Lender to exercise, and no delay in exercising, any right, power
or
remedy under any Loan Document shall operate as a waiver thereof, nor shall
any
single or partial exercise of any right, power or remedy under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power, or remedy. The exercise of any right, power, or remedy shall
in no
event constitute a cure or waiver of any Event of Default or prejudice the
rights of Lender in the exercise of any right hereunder or thereunder. The
rights and remedies provided herein and therein are cumulative and not exclusive
of any right or remedy provided by law.
Section
8.2 Governing
Law.
This
Agreement and the other Loan Documents shall be governed by and construed in
accordance with the laws of the State of Washington (excluding its conflict
of
laws rules) except in the case of the Security Documents, where the location
of
Collateral requires that the creation, validity, perfection, or enforcement
of
the security interests provided for herein be governed by the laws of the
jurisdiction where such Collateral is located.
Section
8.3 Consent
to Jurisdiction.
Borrower
hereby irrevocably submits to the non-exclusive jurisdiction of any state or
federal court sitting in the City of Walla Walla, Walla Walla County,
Washington, in any action or proceeding brought to enforce or otherwise arising
out of or relating to this Agreement or any other Loan Document and irrevocably
waives to the fullest extent permitted by law any objection which it may now
or
hereafter have to the laying of venue in any such action or proceeding in any
such forum, and hereby further irrevocably waives any claim that any such forum
is an inconvenient forum. Borrower agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
No
provision of this Section
8.3
shall impair the right of Lender or the holder of any Note to bring any action
or
32
proceeding
against Borrower or its property in the courts of any other jurisdiction, and
Borrower irrevocably submits to the nonexclusive jurisdiction of the appropriate
courts of the jurisdiction in which Borrower is incorporated or sitting in
any
place where property or an office of Borrower is located.
Section
8.4 Waiver
of Jury Trial.
THE PARTIES HERETO WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND AGREE THAT (A) ANY SUCH ACTION
OR
PROCEEDING SHALL NOT BE TRIED BEFORE A JURY AND (B) ANY PARTY HERETO
MAY
FILE AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY.
Section
8.5 Notices.
All
notices and other communications provided for in the Loan Documents shall be
in
writing or (unless otherwise specified) and shall be mailed (with first class
postage prepaid) or sent or delivered to each party by facsimile or courier
service at the address or facsimile number set forth below, or at such other
address as shall be designated by such party in a written notice to the other
parties.
If
to Lender: Banner
Bank
▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇
▇▇▇▇▇
Attn:
▇▇▇▇
▇▇▇▇▇▇
Senior
Vice President
Facsimile:
(▇▇▇)
▇▇▇-▇▇▇▇
If
to Borrower: Key
Technology, Inc.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇
▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Chairman and CEO
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
With
a copy to: ▇▇▇▇▇▇
▇▇▇▇ LLP
(notices in respect
1600
Pioneer Tower
Article 7
only)
▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇
▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
Except
as otherwise specified all notices sent by mail, if duly given, shall be
effective three (3) Business Days after deposit into the mails, all notices
sent
by a nationally recognized
33
courier
service, if duly given, shall be effective one Business Day after delivery
to
such courier service, and all other notices and communications if duly given
or
made shall be effective upon receipt. Lender shall not incur any liability
to
Borrower for actions taken in reliance on any telephonic or electronic mail
notice referred to in this Agreement which Lender believes in good faith to
have
been given by a Responsible Officer or other Person authorized to borrow or
give
such telephonic notice hereunder on behalf of Borrower.
Section
8.6 Borrower’s
Indemnity.
Whether
or not the transactions contemplated hereby shall be consummated, Borrower
shall
pay, indemnify and hold Lender and its officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an “Indemnified
Person”)
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorney’s fees, which may include, without duplication,
the allocated charges of internal legal counsel) of any kind or nature
whatsoever with respect to any investigation, litigation or proceeding
(including any insolvency proceeding or appellate proceeding) related to this
Agreement or any other Loan Document or any actual or proposed use of proceeds
of the Loans made hereunder, whether or not any Indemnified Person is a party
thereto (all of the foregoing, collectively the “Indemnified
Liabilities”);
provided,
that Borrower shall have no obligation hereunder to any Indemnified Person
with
respect to Indemnified Liabilities arising from the willful misconduct or gross
negligence of such Indemnified Person. All amounts owing under this Section
8.6
shall be paid promptly upon demand. At the election of any Indemnified Person,
Borrower shall defend such Indemnified Person in respect of any Indemnified
Liabilities using legal counsel reasonably satisfactory to such Indemnified
Person at the sole cost and expense of Borrower.
Section
8.7 Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective Successors and assigns, except that Borrower may not assign
or
otherwise transfer all or any part of its rights or obligations hereunder
without the prior written consent of Lender, and any such assignment or transfer
purported to be made without such consent shall be ineffective. Lender may
at
any time assign or otherwise transfer part of its interest under this Agreement
and other Loan Documents (including assignments for security and sales of
participations), and to the extent of any such assignment, the assignee shall
have the same rights and benefits against Borrower and otherwise under this
Agreement (including the right of setoff) as if such assignee were
Lender.
Section
8.8 Set-Off.
In
addition to any rights and remedies of the Lender provided by law, if an Event
of Default has occurred and is continuing, the Lender is authorized at any
time
and from time to time, without prior notice to the Borrower, any such notice
being waived by the Borrower to the fullest extent permitted by law, to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time owing by,
the
Lender to or for the credit or the account of the Borrower against any and
all
obligations owing to the Lender, now or hereafter existing, irrespective of
whether or not the Lender shall have made demand under this Agreement or any
other Loan Document and although such obligations may be contingent or
unmatured.
Section
8.9 Severability.
Any
provision of this Agreement or any other Loan Document which is prohibited
or
unenforceable in any jurisdiction shall as to such jurisdiction be ineffective
to the extent of such prohibition or unenforceability without invalidating
the
34
the
remaining provisions hereof or affecting the validity or enforce-ability of
such
provision in any other jurisdiction. To the extent permitted by applicable
law,
the parties waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
Section
8.10 Survival.
The
representations, warranties and indemnities of Borrower in favor of Lender
shall
survive indefinitely and, without limiting the foregoing, shall survive the
execution and delivery of the Loan Documents, the making of any Loans, the
expiration of the Commitment and the repayment of all amounts due under the
Loan
Documents.
Section
8.11 Executed
in Counterparts.
This
Agreement and the other Loan Documents may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section
8.12 Conditions
Not Fulfilled.
If
the Commitment is not borrowed owing to nonfulfillment of any condition
precedent specified in Article 3,
neither party hereto shall be responsible to any other party for any damage
or
loss by reason thereof, except that Borrower shall be in any event liable to
pay
the fees, Taxes, and expenses for which it is obligated hereunder.
Section
8.13 Entire
Agreement; Amendment, Etc. This
Agreement and the other Loan Documents to which Borrower is a party comprise
the
entire agreement of the parties hereto and may not be amended or modified except
by written agreement of Borrower and Lender. No provision of this Agreement
or
any other Loan Document may be waived except in writing and then only in the
specific instance and for the specific purpose for which given.
Section
8.14 Construction.
In
the event of any conflict between the terms, conditions and provisions of this
Agreement and those of any other Loan Document, the terms, conditions and
provisions of this Agreement shall control.
Section
8.15 References
to Loan Agreement.
For
each of the other Loan Documents, any and all references to the Existing
Agreement, howsoever defined, shall be deemed to be a reference to this
Agreement.
Section
8.16 USA
Patriot Act Notice.
Lender
hereby notifies Borrower that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the
“Patriot
Act”),
it is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and
other information that will allow the Lender to identify the Borrower in
accordance with the Patriot Act.
Section
8.17 Oral
Agreements Not Enforceable.
ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
35
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their respective officers or agents thereunto duly authorized as of the date
first above written.
BORROWER: KEY
TECHNOLOGY, INC., an Oregon corporation
By
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its
SVP
& CFO
LENDER: BANNER
BANK, a Washington banking corporation
By
/s/
▇▇▇▇ ▇▇▇▇▇▇
Its
Senior
Vice President
36
SCHEDULE 1
LITIGATION
|
1.
|
From
time to time in the normal course of business, the Borrower is party
to
litigation concerning patent infringement or employment issues, either
as
claimant or defendant.
|
1
SEA
1634275v7 58243-2
SCHEDULE 2
LIENS
Part
(a). Equipment
Leases.
|
Lessor/Lien
Holder
|
Equipment/Collateral
|
Location
|
Inception
Date
|
|
|
1.
|
Celtic
Leasing Corp
|
CNC
laser cutting system
4000
Watt Bystar ▇▇▇▇
|
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇
|
October,
2000
|
|
2.
|
Parametric
Technology Corporation
|
Pro-E
/ Acuity
|
▇▇▇▇▇
Street
Walla
Walla, WA
|
April,
2002
|
|
3.
|
S.E.
Rentals Pty Limited
|
Printer
/ Copier
|
Melbourne,
Australia
|
May,
2002
|
|
4.
|
S.E.
Rentals Pty Limited
|
Phone
System
|
Melbourne,
Australia
|
May,
2002
|
|
5.
|
Microsoft
Licensing, Inc.
|
Platform
Enterprise Agreement
|
▇▇▇▇▇
Street
Walla
Walla, WA
|
December,
2003
|
Part
(b). Real
Property Leases.
|
1.
|
Indenture
of Lease dated December 30, 1999, as amended, between Borrower
and
▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as assumed by ▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
2.
|
Lease
Agreement dated April 18, 1996 between Borrower and Port of
Walla
Walla, a municipal corporation in the state of
Washington
|
|
3.
|
Lease
Agreement dated October 17, 1989 between Borrower and Port
of Walla
Walla, a municipal corporation in the state of
Washington
|
|
4.
|
Lease
Agreement dated March 1, 2002 between Borrower and Regence
Blue Cross
Blue Shield of Oregon
|
|
5.
|
Lease
Agreement dated May 1, 2004 between Borrower and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇, for office space in Dingley,
Australia
|
|
6.
|
Lease
Agreement dated November 1, 2004 between Borrower and Adrianna
del
Rio ▇▇▇▇▇▇▇▇ for office space in ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇.
|
|
▇.
|
Lease
Agreement dated April __, 2005 between Borrower and Freshpac
Machines
Pty. Ltd. in Sydney, Australia.
|
Part
(c). Liens
to be Released.
|
1.
|
The
liens held by U.S. Bank National Association which are being released
in
connection with this transaction.
|
1
SEA
1634275v7 58243-2
SCHEDULE 3
INTELLECTUAL
PROPERTY MATTERS
No
entries.
1
SEA
1634275v7 58243-2
SCHEDULE 4
ENVIRONMENTAL
MATTERS
|
1.
|
Borrower
uses argon gas and liquid nitrogen in its manufacturing process,
which is
delivered to and stored in large bulk tanks on the exterior of Borrower’s
manufacturing facilities.
|
|
2.
|
The
use and disposal of ordinary cleaning materials for the office and
kitchen
and ordinary office supplies.
|
|
3.
|
Borrower’s
manufacturing process produces scrap metal for which it is required
to
file Toxic Release Inventory Reporting - Form R with the Environmental
Protection Agency.
|
1
SEA
1634275v7 58243-2
SCHEDULE 5
SUBSIDIARIES
|
Name
|
Type
of Entity
|
Jurisdiction
|
Owner
|
Percentage
|
|
|
1.
|
KTH
USA, Inc.
|
Corporation
|
Oregon
|
Key
Technology, Inc.
|
100%
|
|
2.
|
Key
Technology AMVC LLC
|
Limited
Liability Company
|
Oregon
|
Key
Technology, Inc.
|
100%
|
|
3.
|
Key
Technology Holdings USA LLC
|
Limited
Liability Company
|
Oregon
|
Key
Technology, Inc.
|
100%
|
|
4.
|
Suplusco
Holding B.V.
|
Corporation
|
Netherlands
|
Key
Technology Holdings USA LLC
|
100%
|
|
5.
|
Key
Technology B.V.
|
Corporation
|
Netherlands
|
Suplusco
Holding B.V.
|
100%
|
|
6.
|
Key
Technology Australia Pty. Ltd.
|
Corporation
|
Australia
|
Key
Technology, Inc.
|
100%
|
|
7.
|
Freshline
Machines Pty. Ltd.
|
Corporation
|
Australia
|
Key
Technology Australia Pty. Ltd.
|
100%
|
|
8.
|
Productos
Key Mexicana, S. de ▇.▇. de CV
|
Corporation
|
Mexico
|
Key
Technology, Inc.
|
100%
|
1
SEA
1634275v7 58243-2
SCHEDULE 6
INDEBTEDNESS
1. See
Schedule 2.
|
2.
|
Credit
Agreement dated August 8, 2002 among Suplusco Holding B.V.,
Key
Technology B.V., as borrowers, and ABN AMRO Bank, N.V., as lender,
for a
total of approximately €3,400,000 (U.S. equivalent approximately
$3,400,000) comprised of a revolving line of credit, a credit facility
and
a term loan, each secured by assets of Suplusco Holding B.V. and
Key
Technology BV.
|
SEA 1634275v7 58243-2
1