FINOVA
Loan and Security Agreement
Borrower: ▇▇▇▇▇▇▇▇▇▇ Industries, Inc.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇-▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Date: September 19, 1996
THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated the date set forth
above, is entered into by and between the borrower named above (the
"Borrower"), whose address is set forth above and FINOVA Capital
Corporation ("FINOVA"), whose address is ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice
or the passage of time, or both, would constitute an Event of Default,
shall have occurred and be continuing, FINOVA shall, on the Closing Date,
make an advance to Borrower (the "Loan") in an aggregate outstanding
principal amount not to exceed the Total Facility amount (the "Total
Facility") set forth on the schedule hereto (the "Schedule"), subject to
deduction of reserves for accrued interest and such other reserves as
FINOVA deems proper from time to time, and less amounts FINOVA may be
obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to "herein", "herewith"
and words of similar import shall for all purposes be deemed to include the
Schedule.
1.2 Intentionally Omitted.
1.3 Over1ines. If at any time or for any reason the outstanding amount of
advances made pursuant hereto exceeds any of the dollar limitations
contained in the Schedule (any such excess, an "Overline"), then Borrower
shall, upon FINOVA's demand, immediately pay to FINOVA, in cash, the full
amount of such Overline. Without limiting Borrower's obligation to repay to
FINOVA on demand the amount of any Overline, Borrower agrees to pay FINOVA
interest on the outstanding principal amount of any Overline, on demand, at
the rate set forth on the Schedule.
1.4 Intentionallv Omitted.
1.5 Loan Account. All advances made hereunder shall be added to and deemed
part of the Obligations when made. FINOVA may from time to time charge all
Obligations of Borrower to Borrower's loan account with FINOVA..
2. CONDITIONS PRECEDENT. The obligation of FINOVA to make the Loan
hereunder is subject to the fulfillment, to the satisfaction of FINOVA and
its counsel, of each of the following conditions on or prior to the date
set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the following Loan
Documents: (i) The Secured Promissory Note in the amount of the Total
Facility and on such terms and conditions as FINOVA shall specify, executed
by Borrower; (ii) such security agreements as FINOVA may require with
respect to this Agreement, executed by each of the parties thereto; (iii)
Subordination Agreements on FINOVA's standard form, executed by each of the
Subordinating Creditors, together with copies of all instruments subject
thereto showing a legend indicating such subordination; and (iv) such other
documents, instruments and agreements in connection herewith as FINOVA
shall require,
executed, certified and/or acknowledged by such parties as FINOVA shall
designate;
(b) Terminations by Existing Lender. Borrower's existing lender(s)
(including, without limitation, the lender(s) to Borrower's Trend Circuits
division) shall have executed and delivered UCC termination statements and
other documentation evidencing the termination of its liens and security
interests in the Collateral or a subordination agreement in form and
substance satisfactory to FINOVA;
(c) Charter Documents. FINOVA shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified,
or supplemented to the Closing Date, certified by the Secretary of
Borrower;
(d) Good Standing. FINOVA shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing
Date, by the Secretary of State of the state of incorporation of Borrower,
which certificate shall indicate that Borrower is in good standing in such
state;
(e) Foreign Qualification. FINOVA shall have received certificates of
corporate status with respect to Borrower and each other Loan Party, each
dated within ten (10) days of the Closing Date, issued by the Secretary of
State of each state in which such party's failure to be duly qualified or
licensed would have a material adverse effect on its financial condition or
assets, indicating that such party is in good standing;
(f) Authorizing Resolutions and Incumbency. FINOVA shall have received a
certificate from the Secretary of Borrower attesting to (i) the authority
of specific officers of Borrower to execute and deliver this Agreement and
the other Loan Documents to which Borrower is a party, and (ii) the
authenticity of original specimen signatures of such officers;
(g) Insurance. FINOVA shall have received the insurance certificates and
certified copies of policies required by Section 4.4 hereof, in form and
substance satisfactory to FINOVA and its counsel;
(h) Searches: Certificates of Title. FINOVA shall have received searches
reflecting the filing of its financing statements and fixture filings in
such jurisdictions as it shall determine, and shall have received
certificates of title with respect to the Collateral which shall have been
duly executed in a manner sufficient to perfect all of the security
interests granted to FINOVA;
(i) Landlord and Mortgagee Waivers. FINOVA shall have received a landlord
and/or mortgagee waiver from the lessor and mortgagee of Borrower's
Fremont, California location;
(j) Fees. Borrower shall have paid all fees payable by it on the Closing
Date pursuant to this Agreement;
(k) Opinion of Counsel. FINOVA shall have received an opinion of Borrower's
counsel covering such matters as FINOVA shall determine in its sole
discretion;
(1) Officer Certificate. FINOVA shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(m) Solvency Certificate. If requested by FINOVA, a signed certificate of
the Borrower's duly elected Chief Financial Officer concerning the solvency
and financial condition of Borrower, on FINOVA's standard form;
(n) Environmental Assessment. FINOVA shall have reviewed and approved in
its sole discretion the Phase I Environmental Assessment conducted, at
Borrower's expense, at Borrower's Fremont, California facility. Such
assessment shall have included, in FINOVA's discretion, core samplings, and
shall have been conducted by an environmental engineer acceptable to
FINOVA;
(o) Environmental Certificate. FINOVA shall have received an Environmental
Certificate from Borrower, in form and substance satisfactory to FINOVA in
its discretion, with respect to all of Borrower's locations;
(p) Trend Acquisition and Merger. Borrower shall have acquired 100% of the
issued and outstanding stock of Trend Circuits, Inc., ("Trend"), and
Borrower and Trend shall have merged with Borrower being the surviving
corporation of such merger, all on terms satisfactory to FINOVA in its sole
discretion, and FINOVA shall have received such evidence of the foregoing
as it shall require; and
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(q) Other Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed or recorded and shall be in form and substance satisfactory to
FINOVA and its counsel.
3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest: Fees. Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at the per annum rate set
forth on the Schedule. Borrower shall also pay FINOVA the fees set forth on
the Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the continuation
of an Event of Default, Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's loan account at a rate per annum which is
two percent (2%) in excess of the rate which would otherwise be applicable
thereto pursuant to the Schedule.
3.3 Intentionally Omitted.
3.4 Excess Interest. The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following:
(i) the interest rate set forth on the Schedule, calculated and applied to
the principal balance of the Obligations in accordance with the provisions
of this Agreement; (ii) interest after an Event of Default, calculated and
applied to the amount of the Obligations in accordance with the provisions
hereof; and (iii) all Additional Sums (as herein defined), if any. Borrower
agrees to pay an effective contracted for rate of interest which is the sum
of the above referenced elements. The examination fees, attorneys fees,
expert witness fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, Termination Fees, Minimum Interest Charges,
other charges, goods, things in action or any other sums or things of value
paid or payable by Borrower (collectively, the "Additional Sums"), whether
pursuant to this Agreement or any other documents or instruments in any way
pertaining to this lending transaction, or otherwise with respect to this
lending transaction, that under any applicable law may be deemed to be
interest with respect to this lending transaction, for the purpose of any
applicable law that may limit the maximum amount of interest to be charged
with respect to this lending transaction, shall be payable by Borrower as,
and shall be deemed to be, additional interest and for such purposes only,
the agreed upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
It is the intent of the parties to comply with the usury laws of the State
of Arizona (the "applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any
of the documents securing payment hereof or otherwise relating hereto, in
no event shall this Agreement or such documents require the payment or
permit the collection of interest in excess of the maximum contract rate
permitted by the Applicable Usury Law (the "Maximum Interest Rate"). In the
event (a) any such excess of interest otherwise would be contracted for,
charged or received from Borrower or otherwise in connection with the loan
evidenced hereby, (b) the maturity of the Obligations is accelerated in
whole or in part, or (c) all or part of the Obligations shall be prepaid,
so that under any of such circumstances the amount of interest contracted
for, shared or received in connection with the loan evidenced hereby, would
exceed the Maximum Interest Rate, then in any such event (1) the provisions
of this paragraph shall govern and control, (2) neither Borrower nor any
other person or entity now or hereafter liable for the payment of the
Obligations shall be obligated to pay the amount of such interest to the
extent that it is in excess of the Maximum Interest Rate, (3) any such
excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount of the Obligations or refunded to
Borrower, at FINOVA's option, and (4) the effective rate of interest shall
be automatically reduced to the Maximum Interest Rate. It is further
agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate
would exceed the Maximum Interest Rate shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated
term of the loan evidenced hereby, all interest at any time contracted for,
charged or received from Borrower or otherwise in connection with such
loan; and (y) in the event that the effective rate of interest on the loan
should at any time exceed the Maximum Interest Rate, such excess interest
that would otherwise have been collected had there been no ceiling imposed
by the Applicable Usury Law shall be paid to FINOVA from time to time, if
and when the effective interest rate on the loan otherwise falls below the
Maximum Interest Rate, to the extent that interest paid to the date of
calculation does not exceed the
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Maximum Interest Rate, until the entire amount of interest which would
otherwise have been collected had there been no ceiling imposed by the
Applicable Usury Law has been paid in full. Borrower further agrees that
should the Maximum Interest Rate be increased at any time hereafter because
of a change in the Applicable Usury Law, then to the extent not prohibited
by the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the Maximum Interest Rate be
decreased because of a change in the Applicable Usury Law, such decreases
shall not apply to the indebtedness evidenced hereby regardless of when
incurred.
4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA a
security interest in all of the equipment set forth on Exhibit A hereto,
and all proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties), all replacements of such
equipment, all products and all books and records related to any of the
foregoing (all of the foregoing, together with all other property in which
FINOVA may be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral").
4.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by FINOVA at any time to perfect,
maintain, protect and enforce FlNOVA's security interest and other rights
in the Collateral and the priority thereof from time to time, including,
without limitation, executing and filing financing or continuation
statements and amendments thereof and executing and delivering such
documents and titles in connection with motor vehicles, to the extent
included in the Collateral, as FINOVA shall require, all in form and
substance satisfactory to FINOVA. FINOVA may file, without Borrower's
signature, one or more financing statements disclosing FINOVA's security
interest under this Agreement. Borrower agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement. If any Collateral is at
any time in the possession or control of any warehouseman, bailee or any
of Borrower's agents or processors, Borrower shall notify such Person of
FINOVA's security interest in such Collateral and, upon FINOVA's request,
instruct them to hold all such Collateral for FlNOVA's account subject to
FINOVA's instructions. From time to time, Borrower shall, upon FINOVA's
request, execute and deliver confirmatory written instruments pledging the
Collateral to FINOVA, but Borrower's failure to do so shall not affect or
limit FINOVA's security interest or other rights in and to the Collateral.
Until the Obligations have been fully satisfied and this Agreement has
terminated in accordance with its terms, FINOVA's security interest in the
Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. FINOVA may, in its sole discretion, at any
time discharge any lien or encumbrance on the Collateral or bond the same,
pay any insurance, maintain guards, pay any service bureau, obtain any
record or take any other action to preserve the Collateral and charge the
cost thereof to Borrower's loan account as an Obligation.
4.4 Insurance. Borrower will maintain and deliver evidence to FINOVA of
such insurance reasonably required by FINOVA, written by insurers and in
amounts satisfactory to FINOVA. All premiums shall be paid by Borrower as
and when due. Accurate and complete copies of the policies shall be
delivered by Borrower to FINOVA. If Borrower fails to do so, FINOVA may
(but shall not be required to) procure such insurance at Borrower's expense
and charge the cost thereof to Borrower's loan account as an Obligation.
5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1 Examinations. FINOVA shall at all reasonable times have full access to
and the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents,
instruments and agreements relating to the Collateral and the right to
check, test and appraise the Collateral. Borrower shall deliver to FINOVA
any instrument necessary for FINOVA to obtain records from any service
bureau maintaining records for Borrower. All instruments and certificates
prepared by Borrower showing the value of any of the Collateral shall be
accompanied, upon FINOVA's request, by copies of related purchase orders
and invoices. FINOVA may, at any time after the occurrence of an Event of
Default, remove from Borrower's premises Borrower's books and records (or
copies thereof) or require Borrower to deliver such books and records or
copies to FINOVA. FINOVA may, without expense to
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FINOVA, use such of Borrower's personnel, supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security
interest.
5.2 Reporting Requirements. Borrower shall furnish FINOVA, upon request,
such information and statements as FINOVA shall request from time to time
regarding Borrower's business affairs, financial condition and the results
of its operations. Without limiting the generality of the foregoing,
Borrower shall provide FINOVA with (i) on or prior to the date set forth on
the Schedule, monthly unaudited financial statements with respect to the
prior month prepared on a basis consistent with such statements prepared in
prior months and otherwise in accordance with generally accepted accounting
principles, consistently applied; (ii) quarterly 10-Qs, annual 10-Ks and
all other public disclosure information as mandated by or delivered to the
United States Securities Exchange Commission ("SEC") concurrently with the
delivery thereof to the SEC, along with copies of all other publicly
released material information about Borrower, whether or not disclosure is
mandated by the SEC, promptly after release; and (iii) such certificates
relating to the foregoing as FINOVA may reasonably request. Borrower shall
promptly notify FINOVA in writing of the occurrence of any Event of Default
or the occurrence of any event which, with the passage of time or the
giving of notice, or both, would constitute an Event of Default.
6. INTENTIONALLY OMITTED.
7. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL.
7.1 Principal Payments. Principal and interest shall be payable as set
forth in the Secured Promissory Note. In addition, FINOVA shall have the
option of causing Borrower to repay the Loan, without premium, in an amount
equal to 50% of Borrower's Excess Cash Flow. Such Excess Cash Flow
prepayments shall be applied by FINOVA to the Loan in the inverse order of
maturity of payments. The Excess Cash Flow recapture amount shall be
determined and paid by Borrower concurrently with the delivery of
Borrower's monthly financial statement required pursuant to Section 5.2
hereof for the last month of the fiscal year. If the year-end audited
financial statements reflect a greater sum owing to FINOVA under this
Section 7.1, Borrower will pay such additional sum on demand.
7.2 Payments Without Deductions. Borrower shall pay principal, interest,
and all other amounts payable hereunder, or under any related agreement,
without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
7.3 Monthly Accountings. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless
Borrower notifies FINOVA in writing to the contrary within thirty (30) days
after each account is rendered, describing the nature of any alleged errors
or admissions.
8. POWER OF ATTORNEY.
Borrower appoints FINOVA and its designees as Borrower's attorney, with the
power, after the occurrence of any Event of Default, to notify the post
office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail
addressed to Borrower; and to do all other things FINOVA deems necessary or
desirable to carry out the terms of this Agreement. Borrower hereby
ratifies and approves all acts of such attorney. Neither FINOVA nor any of
its designees shall be liable for any acts or omissions nor for any error
of judgment or mistake of fact or law while acting as Borrower's attorney.
This power, being coupled with an interest, is irrevocable until the
Obligations have been fully satisfied and FINOVA's obligation to provide
loans hereunder shall have terminated.
9. RECEIVABLES.
9.1 Bona Fide Sale.
Borrower represents and warrants that each Receivable covers and shall
cover a bona fide sale or lease and delivery by it of goods or the
rendition by it of services in the ordinary course of its business, and
shall be for a liquidated amount.
10. EQUIPMENT.
Borrower shall keep and maintain the Collateral in good operating condition
and repair and make all necessary replacements thereto to maintain and
preserve the value and operating efficiency thereof at all times consistent
with Borrower's past practice, ordinary wear and tear
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excepted. Borrower shall not permit any item of Collateral to become a
fixture (other than a trade fixture) to real estate or an, accession to
other property.
11. OTHER LIENS; NO DISPOSITION OF COLLATERAL.
Borrower represents, warrants and covenants that (a) all Collateral is and
shall continue to be owned by it free and clear of all liens, claims and
encumbrances whatsoever (except for FlNOVA's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be
permitted by FINOVA in its sole discretion from time to time in writing),
and (b) Borrower shall not, without FINOVA's prior written approval, sell,
encumber or dispose of or permit the sale, encumbrance or disposal of any
Collateral or any interest of Borrower therein; provided that Borrower may
sell or trade in equipment in an aggregate amount not in excess of $100,000
in any calendar year.
12. GENERAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
12.1 Due Organization. It is a corporation duly organized, validly existing
and in good standing under the laws of the State set forth on the Schedule,
is qualified and authorized to do business and is in good standing in all
states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite
power and authority to conduct its business as presently conducted, to own
its property and to execute and deliver each of the Loan Documents to which
it is a party and perform all of its Obligations thereunder, and has not
taken any steps to wind-up, dissolve or otherwise liquidate its assets;
12.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set
forth on the Schedule, nor has Borrower been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets
of any person during such time, other than the 1995 mergers of Circuit
Technology, Inc. and ▇▇▇▇▇▇▇▇▇▇ Design, Inc. into Borrower and the 1996
mergers of ▇▇▇▇▇▇▇▇▇▇ Property Group and Trend Circuits, Inc. into
Borrower;
12.3 Due Authorization. The execution, delivery and performance by Borrower
of the Loan Documents to which it is a party have been authorized by all
necessary corporate action and do not and shall not constitute a violation
of any applicable law or of Borrower's Articles or Certificate of
Incorporation or By-Laws or any other document, agreement or instrument to
which Borrower is a party or by which Borrower or its assets are bound;
12.4 Binding Obligation. Each of the Loan Documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower enforceable
against Borrower in accordance with its terms;
12.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, trademarks, trademark
applications and trade names for the present and planned future conduct of
its business without any known conflict with the rights of others, and each
is valid and has been duly registered or filed with the appropriate
governmental authorities;
12.6 Capital. Borrower has capital sufficient to conduct its business, is
able to pay its debts as they mature and owns property having a fair
salable value greater than the amount required to pay all of its debts
(including contingent debts);
12.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely
affect its [Remainder of this page intentionally left blank]
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business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of FINOVA's interests therein;
12.8 Title; Security Interests of FINOVA. Borrower has good, indefeasible
and merchantable title to the Collateral and, upon the filing of UCC-1
Financing Statements in the appropriate offices, this Agreement and such
documents shall create valid and perfected first priority liens in the
Collateral, subject only to Permitted Encumbrances;
12.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or
which restricts its right or ability to incur Indebtedness, and it is not
party to any labor dispute. In addition, no labor contract is scheduled to
expire during the Initial Term of this Agreement, except as disclosed to
FINOVA in writing prior to the date hereof;
12.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or
its business, assets, operations, prospects or condition, financial or
otherwise;
12.11 Consents. Borrower has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection
with the financing contemplated hereby;
12.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to
which it is a party or by which it or its assets are bound, nor has any
event occurred which, with the giving of notice or the lapse of time, or
both, would cause such a default;
12.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such
other Persons described therein as of the date thereof; there are no
material omissions from the Prepared Financials or other facts or
circumstances not reflected in the Prepared Financials; and there has been
no material and adverse change in such financial condition or operations
since the date of the initial Prepared Financials delivered to FINOVA
hereunder;
12.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has
been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate
received any notice to such effect. No notice of intent to terminate a Plan
has been filed under Section 4041 of ERISA, nor has any Plan been
terminated under ERISA. The PBGC has not instituted proceedings to
terminate, or appointed a trustee to administer, a Plan. No lien upon the
assets of Borrower has arisen with respect to a Plan. No prohibited
transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any
Plan or Multiemployer Plan when due. There is no accumulated funding
deficiency in any Plan, whether or not waived;
12.15 Taxes. Borrower has filed all tax returns and such other reports as
it is required by law to file and has paid or made adequate provision for
the payment on or prior to the date when due of all taxes, assessments and
similar charges that are due and payable;
12.16 Locations. Borrower's chief executive office and the offices and
locations where it keeps the Collateral are at the locations set forth on
the Schedule, except to the extent that such locations may have been
changed after notice to FINOVA in accordance with Section 13.5 below;
12.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change
in, the business relationship between Borrower and any customer or any
group of customers whose purchases individually or in the aggregate are
material to the business of Borrower, or with any material supplier, and
there exists no present condition or state of facts or circumstances which
would materially and adversely affect Borrower or prevent Borrower from
conducting such business after the consummation of the transactions
contemplated by this Agreement in substantially the same manner in which it
has heretofore been conducted; and
13. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding and
this Agreement is in effect, it shall:
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13.1 Expenses. Promptly reimburse FINOVA for all reasonable costs, fees and
expenses incurred by FINOVA in connection with the negotiation,
preparation, execution, delivery, administration and enforcement of each of
the Loan Documents, including, but not limited to, the attorneys' and
paralegals' fees of in-house and outside counsel, expert witness fees,
lien, title search and insurance fees, appraisal fees, all charges and
expenses incurred in connection with any and all environmental reports and
environmental remediation activities, and all other costs, expenses, taxes
and filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such
costs, fees and expenses as FINOVA shall incur or for which FINOVA shall
become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and FINOVA's
security interest therein, including, without limitation, the defense or
prosecution of any action involving FINOVA and Borrower or any third party,
(iv) enforcement of any of FINOVA's rights and remedies with respect to the
Obligations or Collateral, and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or other
proceeding involving any Loan Party or any Affiliate, whether or not suit
is filed. Borrower shall also pay all FINOVA charges in connection with
bank wire transfers, forwarding of loan proceeds, deposits of checks and
other items of payment, returned checks, and all other bank and
administrative matters, in accordance with FINOVA's schedule of bank and
administrative fees and charges in effect from time to time;
13.2 Taxes. File all tax returns and pay or make adequate provision for the
payment of all taxes, assessments and other charges on or prior to the date
when due;
13.3 Notice of Litigation. Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
13.4 ERISA. Notify FINOVA in writing (i) promptly upon the occurrence of
any event described in Paragraph 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets
and (ii) prior to any termination, partial termination or merger of a Plan
or a transfer of a Plan's assets;
13.5 Change in Location. Notify FINOVA in writing forty-five (45) days
prior to any change in the location of Borrower's chief executive office or
the location of any Collateral, or Borrower's opening or closing of any
other place of business;
13.6 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for
the conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names
for the conduct of its business;
13.7 Labor Disputes. Promptly notify FINOVA in writing of any labor dispute
to which Borrower is or may become subject and the expiration of any labor
contract to which Borrower is a party or bound;
13.8 Violations of Law. Promptly notify FINOVA in writing of any violation
of any law, statute, regulation or ordinance of any governmental entity, or
of any agency thereof, applicable to Borrower which may materially and
adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
13.9 Defaults. Notify FINOVA in writing within five (5) Business Days of
Borrower's default under any note, indenture, loan agreement, mortgage,
lease or other agreement to which Borrower is a party or by which Borrower
is bound, or of any other default under any Indebtedness of Borrower;
13.10 Capital Expenditures. Promptly notify FINOVA in writing of the making
of any Capital Expenditure materially affecting Borrower's business,
assets, prospects, operations or condition, financial or otherwise;
13.11 Books and Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with generally accepted accounting principles consistently
applied, reflecting all of its financial transactions;
13.12 Leases; Warehouse Agreements. Provide FINOVA with (i) copies of all
agreements between Borrower and any landlord or warehouseman which
8
owns any premises at which any Collateral may, from time to time, be
located, and (ii) without limiting the landlord and mortgagee waivers to be
provided pursuant to Section 2(j) above, landlord and mortgagee waivers in
form acceptable to FINOVA with respect to all locations where any
Collateral is hereafter located;
13.13 Additional Documents. At FINOVA's request, promptly execute or cause
to be executed and delivered to FINOVA any and all documents, instruments
or agreements reasonably deemed necessary by FINOVA to facilitate the
collection of the Obligations or the Collateral or otherwise to give effect
to or carry out the terms or intent of this Agreement or any of the other
Loan Documents; and
13.14 Financial Covenants. Comply with the financial covenants set forth on
the Schedule.
14. NEGATIVE COVENANTS.
Without FINOVA's prior written consent, which consent FlNOVA may withhold
in its sole discretion, so long as any Obligation remains outstanding and
this Agreement is in effect, Borrower shall not:
14.1 Mergers. Make any material change in its capital structure or in its
business or operations which might adversely affect the repayment of the
Obligations; provided, however, that Borrower may acquire the stock or
assets of another Person, and may merge with another Person (so long as
Borrower is the surviving entity of such merger) if (i) no Event of Default
has occurred and is then continuing or would be caused by such acquisition
or merger, and (ii) neither the perfection nor the priority of FINOVA's
liens and security interests in the Collateral would be impaired by such
acquisition or merger;
14.2 Loans. Make advances, loans or extensions of credit to, or invest in,
any Person, except for trade credit extended by Borrower in the normal
course of its business and loans to employees of Borrower not exceeding
$50,000 outstanding in the aggregate at any time;
14.3 Movement of Collateral. Except as otherwise expressly permitted in
this Agreement, move or permit the movement of any of the Collateral from
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
14.4 Adverse Transactions. Enter into any transaction which materially and
adversely affects the Collateral or Borrower's ability to repay the
Obligations in full as and when due;
14.5 Indebtedness of Others. Become directly or contingently liable for the
Indebtedness of any Person, except by endorsement of instruments for
deposit and except in connection with acquisitions otherwise permitted by
Section 14.1 hereof (provided that the Indebtedness incurred does not
exceed the fair value of the assets acquired);
14.6 intentionally Omitted.
14.7 Intentionally Omitted.
14.8 Intentionally Omitted.
14.9 Intentionally Omitted.
14.10 Intentionally Omitted.
14.11 Intentionally Omitted.
14.12 Affiliate Transactions. During the continuation of an Event of
Default, except as set forth below, sell, transfer, distribute or pay any
money or property to any Affiliate, or invest in (by capital contribution
or otherwise) or purchase or repurchase any stock or Indebtedness, or any
property, of any Affiliate, or become liable on any guaranty of the
indebtedness, dividends or other obligations of any Affiliate.
Notwithstanding the foregoing, Borrower may during the continuation of an
Event of Default pay reasonable compensation to employees who are
Affiliates and Borrower may engage in transactions with Affiliates in the
normal course of business, in amounts and upon terms which are fully
disclosed to FINOVA and which are no less favorable to Borrower than would
be obtainable in a comparable arm's length transaction with a Person who is
not an Affiliate;
14.13 Nature of Business. Enter into any new business or make any material
change in any of Borrower's business objectives, purposes or operations;
14.14 FINOVA's Name. Use the name of FINOVA in connection with any of
Borrower's business or activities, except in connection with internal
business matters or as required in dealings with governmental agencies and
financial institutions or with trade creditors of Borrower, solely for
credit reference purposes; or
9
14.15 Margin security. Own, purchase or acquire (or enter into any contract
to purchase or acquire) any "margin security" as defined by any regulation
of the Federal Reserve Board as now in effect or as the same may hereafter
be in effect.
15. ENVIRONMENTAL MATTERS.
15.1 Definitions. The following definitions apply to the provisions of this
Section 15:
(a) the term "Applicable Law" shall include, but shall not be limited to,
each statute named or referred to in this Section 15.1 and all rules and
regulations thereunder, and any other local, state and/or federal laws,
rules, regulations or ordinances, whether currently in existence or
hereafter enacted, which govern, to the extent applicable to the Property
or to Borrower, (i) the existence, cleanup and/or remedy of contamination
on real property; (ii) the protection of the environment from soil, air or
water pollution, or from spilled, deposited or otherwise emplaced
contamination; (iii) the emission or discharge of hazardous substances into
the environment; (iv) the control of hazardous wastes; or (v) the use,
generation, transport, treatment, removal or recovery of Hazardous
Substances; provided, however, that "Applicable Law" for purposes of a
Property outside the State of California shall mean any Federal, state or
local law, rule, regulation or ordinance now or hereafter in effect in or
applicable to properties situated in such state.
(b) The term "Hazardous Substance" shall mean (i) any oil, flammable
substance, explosives, radioactive materials, hazardous wastes or
substances, toxic wastes or substances or any other wastes, materials or
pollutants which either pose a hazard to the Property or to persons on or
about the Property or cause the Property to be in violation of any
Applicable Law; (ii) asbestos in any form which is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls, or
radon gas; (iii) any chemical, material or substance defined as or included
in the definition of "hazardous substances, " "waste," hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any
Applicable Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 USC
ss. 9601 et seq .; the Resource Conservation and Recovery Act ("RCRA"),
42 USC ss. 6901 et seq.; the Hazardous Materials Transportation Act, 49
USC ss. 1801 et seq.; the Federal Water Pollution Control Act, 33 USC
ss. 1251 et seq.; the California Hazardous Waste Control Law ("HWCL"),
Cal. Health & Safety ss. 25100 et seq.; the Underground Storage of
Hazardous Substances Act (Cal. Health & Safety ss. 25280 et seq.;
Hazardous Substance Account Act ("HSAA"), Cal. Health & Safety Code ss.
25300 et seq.; the ▇▇▇▇▇▇-Cologne Water Quality Control Act (the
"▇▇▇▇▇▇-Cologne Act"), Cal. Water Code ss. 13000 et seq.; the Safe
Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65); Title 22
of the California Code of Regulations, Division 4, Chapter 30; (iv) any
other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority which may or could pose
a hazard to the health or safety of the occupants of the Property or the
owners and/or occupants of property adjacent to or surrounding the
Property, or any other person coming upon the Property or adjacent
property; and (v) any other chemical, materials or substance which may or
could pose a hazard to the environment; and
(c) the term "Property" shall mean all real property, wherever located, in
which Borrower or any Affiliate of Borrower has any right, title or
interest, whether now existing or hereafter arising, and including, without
Iimitation, as owner, lessor or lessee.
15.2 Covenants and Representations.
(a) Borrower represents and warrants that there have not been during the
period of Borrower's possession of any interest in the Property and, to the
best of its knowledge after reasonable inquiry, there have not been at any
other times, any activities on the Property involving, directly or
indirectly, the use, generation, treatment, storage or disposal of any
Hazardous Substances except in compliance with Applicable Law, as described
in the Disclosure Schedule provided to FINOVA by Borrower, or de minimis
amounts of Hazardous Substances (i) under, on or in the land included in
the Property, whether contained in soil, tanks, bumps, ponds, lagoons,
barrels, cans or other containment, structures or equipment, (ii)
incorporated in the buildings, structures or improvements included in the
Property, including any building material containing asbestos, or (iii)
used in connection with any operations on or in the Property.
(b) Without limiting the generality of the foregoing and to the extent not
included within the scope of this
10
Section 15.2, Borrower represents and warrants that it is in material
compliance with Applicable Law and has received no notice from any person
or any governmental agency or other entity of any violation by Borrower or
its Affiliates of any Applicable Law.
(c) Borrower shall be solely responsible for and agrees to indemnify
FINOVA, protect and defend FINOVA with counsel reasonably acceptable to
FINOVA, and hold FINOVA harmless from and against any claims, actions,
administrative proceedings, judgments, damages, punitive damages,
penalties, fines, costs, liabilities (including sums paid in settlements of
claims), interest or losses, reasonable attorneys' fees (including any fees
and expenses incurred in enforcing this indemnity), reasonable consultant
fees, reasonable expert fees, and other reasonable out-of-pocket costs or
expenses actually incurred by FINOVA (collectively, the "Environmental
Cost"), that may, at any time or from time to time, arise directly or
indirectly from or in connection with: (i) the presence, suspected
presence, release or suspected release of any Hazardous Substance whether
into the air, soil, surface water or groundwater of or at the Property, or
any other violation of Applicable Law, or (ii) any breach of the foregoing
representations and covenants; except to the extent any of the foregoing
result from the actions of FINOVA, its employees, agents and
representatives. All Environmental Costs incurred or advanced by FINOVA
shall be deemed to be made by FINOVA in good faith and shall constitute
Obligations hereunder.
16. TERM; TERMINATION.
16.1 Term. The initial term of this Agreement shall be as set forth on the
Schedule (the "Initial Term"), unless earlier terminated as provided
herein.
16.2 Intentionally Omitted.
16.3 Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
16.4 Early Termination: Termination Fee.
Borrower may terminate this Agreement at any time but only upon sixty (60)
days' prior written notice and prepayment of the Obligations. Upon any such
early termination by Borrower, any partial prepayment of the Obligations by
Borrower, or any termination of this Agreement by FINOVA upon the
occurrence of an Event of Default, then, and in any such event, Borrower
shall pay to FINOVA, except as specifically provided herein, upon the
effective date of such termination a fee (the "Termination Fee") in an
amount equal to the amount shown on the Schedule.
17. DEFAULT.
17.1 Events of Default. Any one or more of the following events shall
constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations; provided that not more than two (2) times in any calendar year
FINOVA shall give Borrower written notice of Borrower's non-payment, and
Borrower shall have ten (10) days from the date of such notice to make such
payment;
(b) Borrower or any other Loan Party fails or neglects to perform, keep, or
observe any Obligation including, but not limited to, any term, provision,
condition, covenant or agreement contained in any Loan Document to which
Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the
value or priority of FINOVA's security interest in the Collateral is
materially impaired;
(e) Any material portion of Borrower's assets is seized, attached,
subjected to a writ or distress warrant, is levied upon or comes into the
possession of any judicial officer;
(f) Borrower shall generally not pay its debts as they become due or shall
enter into any agreement (whether written or oral), or offer to enter into
any agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the
supervision, management or control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by Borrower,
or any such proceeding is commenced against Borrower and remains
undischarged or unstayed for forty-five (45) days;
11
(h) Any notice of lien, levy or assessment is filed of record with respect
to any of Borrower's assets, in excess of $50,000 and is not discharged
within thirty (30) days, so long as during such 30-day period the priority
of FINOVA's security interest in the Collateral is not impaired;
(i) Any judgments are entered against Borrower in an aggregate amount
exceeding $50,000 and are not discharged within thirty (30) days, so long
as during such 30-day period the priority of FINOVA's security interest in
the Collateral is not impaired;
(1) Any default shall occur under any agreement between Borrower and any
third party if such default would result in a right by such third party to
accelerate the maturity of Indebtedness in excess of $250,000 of Borrower
to such third party, or any default under any agreement entered into after
the date hereof between Borrower and any third party not affecting or
encumbering assets owned by Borrower as of the Closing Date, if such
default would result in a right by such third party to accelerate the
maturity of Indebtedness in excess of $500,000 of Borrower to such third
party.
(k) Any representation or warranty made or deemed to be made by Borrower,
any Affiliate or any other Loan Party in any Loan Document or any other
statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur with respect
to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection
with any Plan shall arise and is not discharged within thirty (30) days, so
long as during such 30-day period the priority of FINOVA's security
interest in the Collateral is not impaired; Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any Plan
or any Multiemployer Plan as one or more contributions thereto; Borrower or
any of its ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency, whether or not waived; or
(m) There shall be a change in the beneficial ownership and control,
directly or indirectly, of the majority of the outstanding voting
securities or other interests entitled (without regard to the occurrence of
any contingency) to elect or appoint members of the board of directors or
other managing body of Borrower other than any such change as the result of
the death or disability of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, or
as the result of a transfer for estate planning purposes of any shares of
Borrower owned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ to a trust
for the benefit of his or her heirs, provided that except for death or
disability, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ shall continue to control the voting of
the shares in the trust.
17.2 Remedies. Upon the occurrence of an Event of Default, FINOVA may, at
its option and in its sole discretion and in addition to all of its other
rights under the Loan Documents, terminate this Agreement and declare all
of the Obligations to be immediately payable in full. FINOVA shall also
have all of its rights and remedies under applicable law, including,
without limitation, the default rights and remedies of a secured party
under the Code. Further, FINOVA may, at any time, take possession of the
Collateral and keep it on Borrower's premises, at no cost to FINOVA, or
remove any part of it to such other place(s) as FINOVA may desire, or
Borrower shall, upon FINOVA's demand, at Borrower's sole cost, assemble the
Collateral and make it available to FINOVA at a place reasonably convenient
to FINOVA. FINOVA may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such
terms as FINOVA deems advisable, at FINOVA's discretion, and may, if FINOVA
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or
adjourned sale without giving a new notice of sale. Borrower agrees that
FINOVA has no obligation to preserve rights to the Collateral or ▇▇▇▇▇▇▇▇
any Collateral for the benefit of any Person. FINOVA is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, name, trade secrets, trade names, trademarks and advertising
matter, or any similar property, in advertising or selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to FINOVA's benefit. Any requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to Borrower at its address set
forth in the heading to this Agreement at least five (5) days before sale
or other disposition. The proceeds of sale shall be applied, first, to all
attorneys fees and other expenses of sale, and second, to the Obligations
in such order as FINOVA shall elect, in its sole discretion. FINOVA shall
return any excess to Borrower or deliver such excess to such other Person
as directed by a court of competent jurisdiction, and
12
Borrower shall remain liable for any deficiency to the fullest extent
permitted by law.
17.3 Standards for Determining Commercial Reasonableness. Borrower and
FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by FINOVA, including, but not limited to,
FINOVA's use in its sole discretion of other or different times, places and
manners of noticing and conducting any disposition of Collateral shall not
be deemed unreasonable): Any public or private disposition: (i) as to which
on no later than the fifth calendar day prior thereto written notice
thereof is mailed or personally delivered to Borrower and, with respect to
any public disposition, on no later than the fifth calendar day prior
thereto notice thereof describing in general non-specific terms, the
Collateral to be disposed of is published once in a newspaper of general
circulation in the county where the sale is to be conducted (provided that
no notice of any public or private disposition need be given to the
Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m.
18. DEFINITIONS.
18.1 Defined Terms. As used in this Agreement, the following terms have the
definitions set forth below:
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of any Person, whether through
ownership of common or preferred stock or other equity interests, by
contract or otherwise. Without limiting the generality of the foregoing,
each of the following shall be an Affiliate: any officer, director,
employee or other agent of Borrower, any shareholder owning 15% or more of
the voting stock of Borrower (a "Material Shareholder") or any subsidiary
of Borrower, and any other Person with whom or which Borrower has common
Material Shareholders, officers or directors.
"Business Day" means any day on which commercial banks in both Los Angeles,
California and Phoenix, Arizona are open for business.
"Capital Expenditure" means all expenditures made and liabilities incurred
for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one
year and including, without limitation, those arising in connection with
Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in accordance
with generally accepted accounting principles, should be capitalized for
financial reporting purposes and reflected as a liability on the balance
sheet of Borrower.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
"EBITDA" for any fiscal year means net income of Borrower as calculated in
accordance with generally accepted accounting principles, consistently
applied plus (to the extent deducted in determining net income) interest
expense incurred, federal and state income taxes accrued (whether paid or
unpaid), depreciation and amortization expense.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated
and whether or not foreign) which is or may hereafter become a member of a
group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 17.1 of
this Agreement.
"Excess Cash Flow" for any fiscal year of Borrower means EBITDA less the
sum of Capital Expenditures except to the extent financed with any Person
other than FINOVA, federal and state income taxes (paid in cash), interest
expense, principal payments paid to FINOVA
13
(other than a cash sweep pursuant to Section 7.1), other term Indebtedness
and payments made under capitalized leases; Provided, however, any
prepayments of term Indebtedness (other than to FINOVA) or capitalized
leases shall only be deducted for purposes of this definition to the extent
Excess Cash Flow shall not be reduced to less than $2,000,000.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or
otherwise, however evidenced, created, incurred, acquired, owing or
arising, whether under written or oral agreement, operation of law or
otherwise, and includes, without limiting the foregoing (i) the
Obligations, (ii) obligations and liabilities of any Person secured by a
lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable therefor,
(iii) obligations and liabilities created or arising under any lease
(including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower,
even though the rights and remedies of the lessor, seller or lender are
limited to repossession, (iv) all unfunded pension fund obligations and
liabilities and (v) deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loan" has the meaning set forth in Section 1.1 hereof.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and payable to FINOVA, and any other agreement entered
into in connection with this Agreement, together with all alterations,
amendments, changes, extensions, modifications, refinancings, refundings,
renewals, replacements, restatements, or supplements, of or to any of the
foregoing.
"Loan Party" means Borrower, each Subordinating Creditor and each other
party (other than FINOVA) to any Loan Document.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees
of Borrower or any ERISA Affiliate.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time
owing by Borrower to FINOVA, whether evidenced by this Agreement, any note
or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
FINOVA in Borrower's debts owing to others), absolute or contingent, due or
to become due, including, without limitation, all interest, charges,
expenses, fees, attorney's fees, expert witness fees, examination fees,
letter of credit fees, collateral monitoring fees, closing fees, facility
fees, Termination Fees, Minimum Interest Charges and any other sums
chargeable to Borrower hereunder or under any other agreement with FINOVA..
"Overlines" has the meaning set forth in Section 1.3 hereof.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests on the Collateral set forth on the Schedule and
incorporated herein by this reference.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other
entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Prepared Financial" means the balance sheets of Borrower as of the date
set forth in the Schedule, and as of each subsequent date on which audited
balance sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and
changes in cash flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction
14
described in Section 4975(c) of the IRC which is not exempt by reason of
Section 4975(c)(2) of the IRC.
"Reportable Event" means a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.
"Subordinated Debt" means liabilities of Borrower the repayment of which is
subordinated, to the payment and performance of the Obligations, pursuant
to a subordination agreement on FlNOVA's standard form.
"Subordinating Creditor" means the persons set forth on the Schedule.
"Total Facility" has the meaning set forth on the Schedule.
18.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
19. MISCELLANEOUS.
19.1 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination
of this Agreement; recourse to security shall not be required at any time.
Borrower waives presentment and protest of any instrument and notice
thereof, notice of default and, to the extent permitted by applicable law,
all other notices to which Borrower might otherwise be entitled.
19.2 No Waiver by FINOVA. Neither FlNOVA's failure to exercise any right,
remedy or option under this Agreement, any supplement, the Loan Documents
or other agreement between FINOVA and Borrower nor any delay by FINOVA in
exercising the same shall operate as a waiver. No waiver by FINOVA shall be
effective unless in writing and then only to the extent stated. No waiver
by FINOVA shall affect its right to require strict performance of this
Agreement. FINOVA's rights and remedies shall be cumulative and not
exclusive.
19.3 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
FlNOVA's and Borrower's respective representatives, successors and assigns.
19.4 Serverability.. If any provision of this Agreement shall be prohibited
or invalid under applicable law, it shall be ineffective only to such
extent, without invalidating the remainder of this Agreement.
19.5 Amendments: Assignments. This Agreement may not be modified, altered
or amended, except by an agreement in writing signed by Borrower and
FINOVA. Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including,
without limitation, any of Borrower's rights, title, interests, remedies,
powers and duties hereunder or thereunder. Borrower hereby consents to
FlNOVA's participation, sale, assignment, transfer or other disposition, at
any time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including, without
limitation, F1NOVA's rights, title, interests, remedies, powers and duties
hereunder or thereunder. In connection therewith, FINOVA may disclose all
documents and information which FINOVA now or hereafter may have relating
to Borrower or Borrower's business. To the extent that FINOVA assigns its
rights and obligations hereunder to a third party, FINOVA shall thereafter
be released from such assigned obligations to Borrower and such assignment
shall effect a novation between Borrower and such third party.
19.6 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire understanding
of the parties with respect to the transactions contemplated hereby.
19.7 Governing Law: Waivers. THIS AGREEMENT SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF
THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA, THE STATE OF
ARIZONA OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN WHICH
FINOVA SHALL INITIATE LEGAL OR EQUITABLE
15
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND
VENUE. BORROWER WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN THE MANNER SET FORTH
IN SECTION 19.13 HEREOF FOR THE GIVING OF NOTICE. BORROWER FURTHER WAIVES
ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED
AGAINST IT.
19.8 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance of this Agreement by the parties. No termination of this
Agreement or of any guaranty of the Obligations shall affect or impair the
powers, obligations, duties, rights, representations, warranties or
liabilities of the parties hereto and all shall survive any such
termination.
19.9 Evidence of Obligations. Each Obligation may, in FINOVA's discretion,
be evidenced by notes or other instruments issued or made by Borrower to
FINOVA. If not so evidenced, such Obligation shall be evidenced solely by
entries upon FINOVA's books and records.
19.10 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i)
exchange, enforce, waive or release any of the Collateral, (ii) apply
Collateral and direct the order or manner of sale thereof as it may
determine, and (iii) settle, compromise, collect or otherwise liquidate any
Collateral in any manner without affecting its right to take any other
action with respect to any other Collateral.
19.11 Application of Collateral. FINOVA shall have the continuing and
exclusive right to apply or reverse and re-apply any and all payments to
any portion of the Obligations. To the extent that Borrower makes a payment
or FINOVA receives any payment or proceeds of the Collateral for Borrower's
benefit which is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or any other party under any bankruptcy law, common
law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA.
19.12 Intentionally Omitted.
19.13 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and FINOVA at their addresses set forth at the
beginning of this Agreement provided that a copy of any notice to FINOVA
shall also be sent as follows:
FINOVA Capital Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ Esq.
Notices hereunder shall be deemed received on the earlier of receipt,
whether by mail, personal delivery, facsimile, or otherwise, or upon
deposit in the United States mail, postage prepaid.
19.14 Brokerage Fees. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission and Borrower agrees to
indemnify and hold FINOVA harmless against any and all such claims.
19.15 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to
Borrower or which reasonably should be known to Borrower which Borrower has
not disclosed to FINOVA in writing with respect to the transactions
contemplated by this Agreement which materially and adversely affects the
business, assets, operations, prospects or condition (financial or
otherwise), of Borrower.
19.16 Publicity. FINOVA is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published announcing the
consummation of this transaction and the aggregate amount thereof.
19.17 Captions. The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.
19.18 Injunctive Relief. Borrower recognizes that, in the event Borrower
fails to perform, observe or
16
discharge any of its Obligations under this Agreement, any remedy at law
may prove to be inadequate relief to FINOVA. Therefore, FINOVA, if it so
requests, shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
19.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
19.20 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
amendments or exhibits hereto.
19.21 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
19.22 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against FINOVA, or any of FINOVA's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or
any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, whether or not
relating hereto or thereto, occurred, done, omitted or suffered to be done
by FINOVA, or by FlNOVA's directors, officers, employees, agents,
accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Borrower by the commencement
of an action or proceeding in a court of competent jurisdiction by the
filing of a complaint within one year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based and service of a summons and complaint on an officer of FINOVA or
any other person authorized to accept service of process on behalf of
FINOVA, within 30 days thereafter. Borrower agrees that such one-year
period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year
period provided herein shall not be waived, tolled, or extended except by a
specific written agreement of FINOVA. This provision shall survive any
termination of this Loan Agreement or any other agreement.
19.23 Liability. Neither FINOVA nor any FINOVA Affiliate shall be liable
for any indirect, special, incidental or consequential damages in
connection with any breach of contract, tort or other wrong relating to
this Agreement or the Obligations or the establishment, administration or
collection thereof (including without limitation damages for loss of
profits, business interruption, or the like), whether such damages are
foreseeable or unforeseeable, even if FINOVA has been advised of the
possibility of such damages. Neither FINOVA, nor any FINOVA Affiliate shall
be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by the Borrower through the
ordinary negligence of FINOVA, or any FINOVA Affiliate. "FINOVA Affiliate"
shall mean FINOVA's directors, officers, employees, agents, attorneys or
other person or entity affiliated with or representing FINOVA.
19.24 Notice of Breach by FINOVA. Borrower agrees to give FINOVA written
notice of (i) any action or inaction by FINOVA or any attorney of FINOVA in
connection with any Loan Documents that may be actionable against FINOVA or
any attorney of FINOVA or (ii) any defense to the payment of the
Obligations for any reason, including, but not limited to, commission of a
tort or violation of any contractual duty or duty implied by law. Borrower
agrees that unless such notice is fully given as promptly as possible (and
in any event within thirty (30) days) after the Chief Executive Officer,
Chief Financial Officer or any other senior officer of Borrower has
knowledge, or with the exercise of reasonable diligence should have had
knowledge, of any such action, inaction or defense, Borrower shall not
assert, and Borrower shall be deemed to have waived, any claim or defense
arising therefrom.
17
19.25 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (ii)
ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND
BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR
ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH FINOVA OR BORROWER; IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
Tax Identification No.: ▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
President or Vice President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (witness)
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
FINOVA:
FINOVA CAPITAL CORPORATION
By /s/
---------------------------------
Title Vice President
18
FINOVA
Schedule to
Loan and Security Agreement
Borrower: ▇▇▇▇▇▇▇▇▇▇ Industries, Inc.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Date: September 19, 1996
This Schedule forms an integral part of the Loan and Security Agreement
between the above Borrower and FINOVA Capital Corporation dated the above
date, and all references herein and therein to "this Agreement" shall be
deemed to refer to said Agreement and to this Schedule.
TOTAL FACILITY (Section 1.1):
$4,614,800
LOANS (Section 1.2):
A term loan against the value of the Collateral in an aggregate outstanding
principal amount not to exceed Four Million Six Hundred Fourteen Thousand
Eight Hundred Dollars ($4,614,800); provided, that the Loan shall be on
such terms as are set forth on a separate promissory note (the "Secured
Promissory Note") of Borrower in form and substance satisfactory to FINOVA
in its sole discretion.
CONDITIONS PRECEDENT (Section 2.1):
The obligation of FINOVA to make the Loan hereunder is subject to the
fulfillment, to the satisfaction of FINOVA and its counsel, of each of the
following conditions, in addition to the conditions set forth in Sections
2.1 and 2.2 above: (a) there shall have been no material adverse change in
the business, operations, profits or prospects of Borrower, or in the
condition of the assets of Borrower, between June 30, 1996 and the date
hereof. Borrower shall cause the conditions precedent set forth in Section
2.1 of this Agreement and set forth above in this Schedule to be satisfied
on or before September 30, 1996.
INTEREST AND FEES (Section 3.1):
Interest. Borrower shall pay FINOVA interest on the daily outstanding
balance of Borrower's loan account at a per annum rate equal to, at
Borrower's election not less than five (5) days prior to the Closing Date,
either (i) 1.0% in excess of the rate of interest announced publicly by
Citibank, N.A., from time to time as its "base rate" (or any successor
thereto), which may not be such institution's lowest rate (the "Base
Rate"), or (ii) the rate of interest on a United States treasury bond of
the same amount and term as the Loan, plus 3.5% (the "Treasury Option"), as
more fully set forth in the Secured Promissory Note of even date. If
Borrower elects an interest rate based upon the Base Rate, the interest
rate chargeable hereunder shall be increased or decreased, as the case may
be, without notice or demand of any kind, upon the announcement of any
change in the Base Rate. Each change in the Base Rate shall be
effective hereunder on the first day following the announcement of such
change, provided, that a cumulative change of less than one-fourth of one
percent (0.25 %) shall not be considered. The Treasury Option shall be a
fixed interest rate for the term of the Loan. Interest charges and all
other fees and charges herein shall be computed on the basis of a year of
360 days and actual days elapsed and shall be payable to FINOVA in arrears
on the first day of each month.
Collateral Monitoring Fee. At the closing of this transaction and on the
first day of each anniversary thereafter, Borrower shall pay FINOVA a
collateral monitoring fee of Twelve Thousand Five Hundred Dollars ($12,500)
which shall be deemed fully earned at the time of each payment.
Closing Fee. At the closing of this transaction, Borrower shall pay to
FINOVA a closing fee in an amount equal to one-half of one percent (0.50%)
of the amount of the Total Facility, which shall be deemed fully earned at
the time of payment.
REPORTING REQUIREMENTS (Section 5.2):
1. Borrower shall provide FINOVA with monthly unaudited financial
statements within thirty (30) days after the end of each month.
2. Borrower shall provide FINOVA with annual operating budgets (including
income statements, balance sheets and cash flow statements, by month) for
the upcoming fiscal year of Borrower within ninety (90) days prior to the
end of each fiscal year of Borrower.
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 12.1): Oregon
Fictitious Names/Prior Corporate Names (Section 12.2): Trend Circuits,
▇▇▇▇▇▇▇▇▇▇ Design.
Borrower Locations (Section 12.16): ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇-▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(Chief Executive Office)
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇. ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(location of Collateral)
Permitted Encumbrances (Section 18.1): None other than
junior liens but
only to the extent
permitted by FINOVA
in writing.
FINANCIAL COVENANTS (Section 13.14):
Borrower shall comply with the debt to cash flow and minimum tangible net
worth covenants set forth in Borrower's loan agreement with Key Bank, a
copy of which is attached hereto as Exhibit B, and with any amendments to
such covenants provided that no waiver, forbearance or termination of
either or both such covenants by Key Bank shall be binding upon FINOVA.
TERM (Section 16.1):
The initial term of this Agreement shall be until September 1, 1999 (the
"Initial Term"), unless earlier terminated as provided in Section 16 or 17
above or elsewhere in this Agreement.
TERMINATION FEE (Section 16.4):
The Termination Fee provided in Section 16.4 shall be an amount equal to
the following percentage of the amount prepaid average daily outstanding
balance of the Obligations for the 180-day period (or lesser period if
applicable) preceding the date of termination:
(i) three percent (3%), if such early termination occurs on or prior to the
first anniversary of this Agreement;
(ii) two percent (2%), if such early termination occurs after the first
anniversary of this Agreement, but on or prior to the second anniversary of
this Agreement;
(iii) one percent (1%), if such early termination occurs after the second
anniversary of this Agreement.
ADDITIONAL DEFINITIONS (Section 18.1):
"Prepared Financials" means the balance sheets of Borrower as of
June 30, 1996, and as of each subsequent date
on which audited balance sheets are delivered
to FINOVA from time to time hereunder, and
the related statements of operations, changes
in stockholder's equity and changes in cash
flow for the periods ended on such dates.
"Subordinating Creditor" means ( N/A)
DISBURSEMENT (Section 19.12):
The Loan shall be wired to the following operating account of Borrower: Key
Bank Account No. 370211003451, ABA No. ▇▇▇▇▇▇▇▇▇
Borrower: FINOVA:
▇▇▇▇▇▇▇▇▇▇ INDUSTRIES, INC. FINOVA CAPITAL CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ By /s/
------------------------------- -------------------------------
President or Vice President Vice President
/s/ ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ (Witness)
-----------------------------------
Name
▇▇▇▇▇ ▇ ▇▇▇▇▇▇
3
FINOVA
SECURED PROMISSORY NOTE
$4,614,800 As of September 19, 1996
FOR VALUE RECEIVED, the undersigned, PRAEGlTZER INDUSTRIES, INC.,
an Oregon corporation, hereby promises to pay to FlNOVA CAPITAL CORPORATION
("FINOVA"), or order, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other address as the holder may specify in
writing, the principal sum of Four Million Six Hundred Fourteen Thousand
Eight Hundred Dollars ($4,614,800) plus interest in the manner and upon the
terms and conditions set forth below. This Secured Promissory Note ("note")
is made pursuant to that certain Loan and Security Agreement of even date
between the undersigned and FINOVA (the "Agreement"), the provisions of
which are incorporated herein by this reference. Capitalized terms herein,
unless otherwise noted, shall have the meaning set forth in the Agreement.
1.0 Rate And Payment Of Interest.
1.1 The principal balance of this Note shall bear interest at a per
annum rate equal to either the "Fixed Rate" or the "Floating Rate" set
forth below, as elected by Borrower as of the Closing Date:
a. Fixed Rate. Three and one-half percent (3.50%) in excess of
the rate of interest, as quoted in The Wall Street Journal (or, if such
publication shall cease to publish such rate or shall cease to be
published, as quoted in another source selected and deemed reliable by
Lender) five (5) days prior to the Closing Date, payable on the United
State Treasury bonds that have a maturity closest to (but not extending
beyond) the date that is exactly three (3) years after the date of
determination; or
b. Floating Rate. One (1%) in excess of the reference (or
equivalent) rate of interest announced publicly by Citibank, N.A., New
York, New York, from time to time as its "base rate" (or any successor
thereto), which may not be such institution's lowest rate (the "Base
Rate"). The interest rate chargeable hereunder shall be increased or
decreased, as the case may be, without notice or demand of any [kind, upon
the announcement of any change in the Base Rate. Each change in the Base
Rate shall be effective hereunder on the first day following the
announcement of such change, provided, that a cumulative change of less
than one-fourth of one percent (0.25%) shall not be considered.
Interest charges and all other fees and charges herein shall be computed on
the basis of a year of 360 days and actual days elapsed and shall be
payable to FlNOVA in arrears on the first day of each month hereafter at
its address set forth above. Accrued but unpaid interest under this Note
shall be due and payable on the first day of each month, commencing October
1, 1996, and at maturity, on which date all interest remaining unpaid shall
be due and payable.
2.0 Schedule Of Principal and Interest Payments.
Principal and Interest under this Note shall be due and payable
in accordance with the schedule attached hereto as Schedule 1, and shall be
due and payable on the first Business Day of each calendar month,
commencing October 1, 1996. A final installment of all remaining principal,
accrued and unpaid interest and all other sums payable pursuant to the Loan
Documents shall be due and payable on September 1, 1999.
In addition to the foregoing, Borrower shall make the payments
based on its Excess Cash Flow as set forth in Section 7.1 of the Agreement.
3.0 Prepayment.
Prepayment may be made under this Note in whole or in part,
subject to the Termination Fee, as applicable, as set forth in the
Agreement.
4.0 Holder's Right Of Acceleration.
If the Agreement is terminated for any reason whatsoever, or if
there shall occur an Event of Default or if this Note is not paid when due,
the entire remaining principal balance and all accrued and unpaid interest
and other fees and charges with respect to this Note shall, at FINOVA's
option, become immediately due and payable.
5.0 Holder's Rights Upon Default.
If any Event of Default occurs, then from the date such Event of
Default occurs until it is cured or waived in writing, in addition to any
agreed upon charges, the principal balance of this Note shall thereafter,
at FINOVA's option, bear interest at two (2.00) percentage points per annum
in addition to the rate set forth in Section 1 above, calculated over a
year of three hundred sixty (360) days.
6.0 Additional Rights Of Holder.
If any installment of principal or interest hereunder is not paid
when due, the holder shall have, in addition to the rights set forth
herein, in the Agreement and under law, the right to compound interest by
adding the unpaid interest to principal, with such amount thereafter
bearing interest at the rate provided in this Note.
7.0 General Provisions.
7.1 If this Note is not paid when due or upon the occurrence of
an Event of Default, the undersigned further promises to pay all costs of
collection, foreclosure fees, reasonable attorneys' fees and expert witness
fees incurred by the holder, whether or not suit is filed hereon, and the
fees, costs and expenses as provided in the Agreement.
7.2 The undersigned hereby consents to any and all renewals,
replacements and/or extensions of time for payment of this Note before, at
or after maturity.
7.3 The undersigned hereby consents to the acceptance, release or
substitution of security for this Note.
7.4 Presentment for payment, notice of dishonor, protest and
notice of protest are hereby expressly waived.
7.5 The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the
principal balance of this Note in accordance with the provisions of this
Note; (ii) interest after an Event of Default, calculated and applied to any
amounts due under this Note in accordance with the provisions hereof; and
(iii) all Additional Sums (as herein defined), if any. Borrower agrees to
pay an effective contracted for rate of interest which is the sum of the
above-referenced elements. All examination fees, attorneys fees, expert
witness fees, letter of credit fees, collateral monitoring fees, closing
fees, facility fees, Termination
2
Fees, Minimum Interest Charges, other charges, goods, things in action or
any other sums or things of value paid or payable by Borrower
(collectively, the "Additional Sums"), whether pursuant to this Note, the
Agreement or any other documents or instruments in any way pertaining to
this lending transaction, or otherwise with respect to this lending
transaction, that under any applicable law may be deemed to be interest
with respect to this lending transaction, for the purpose of any applicable
law that may limit the maximum amount of interest to be charged with
respect to this lending transaction, shall be payable by Borrower as, and
shall be deemed to be, additional interest and for such purposes only, the
agreed upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
It is the intent of the parties to comply with the usury law of the State
of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of
the documents securing payment hereof or otherwise relating hereto, in no
event shall this Note or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by
the Applicable Usury Law (the "Maximum Interest Rate.). In the event (a)
any such excess of interest otherwise would be contracted for, charged or
received from Borrower or otherwise in connection with the loan evidenced
hereby, (b) the maturity of the indebtedness evidenced by this Note is
accelerated in whole or in part, or (c) all or part of the principal or
interest of this Note shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum
Interest Rate, then in any such event (1) the provisions of this paragraph
shall govern and control, (2) neither Borrower nor any other person or
entity now or hereafter liable for the payment here of shall be obligated
to pay the amount of such interest to the extent that it is in excess of
the Maximum Interest Rate, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid
principal amount hereof or refunded to Borrower, at FINOVA's option, and
(4) the effective rate of interest shall be automatically reduced to the
Maximum Interest Rate. It is further agreed, without limiting the
generality of the foregoing, that to the extent permitted by the Applicable
Usury Law; (x) all calculations of interest which are made for the purpose
of determining whether such rate would exceed the Maximum Interest Rate
shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest
at any time contracted for, charged or received from Borrower or otherwise
in connection with such loan; and (y) in the event that the effective
rate of interest on the loan should at any time exceed the Maximum Interest
Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the
loan otherwise falls below the Maximum Interest Rate, to the extent that
interest paid to the date of calculation does not exceed the Maximum
Interest Rate, until the entire amount of interest which would otherwise
have been collected had there been no ceiling imposed by the Applicable
Usury Law has been paid in full. Borrower further agrees that should the
Maximum Interest Rate be increased at any time hereafter because of a
change in the Applicable Usury Law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent not
prohibited by the Applicable Usury Law, should the Maximum Interest Rate be
decreased because of a change in the Applicable Usury Law, such decreases
shall not apply to the indebtedness evidenced hereby regardless of when
incurred.
7.6 No delay or omission on the part of the holder of this Note in
exercising any right shall operate as a waiver thereof or of any other
right.
7.7 No waiver by the holder of this Note upon any one occasion shall
be effective unless in writing nor shall it be construed as a bar or waiver
of any right or remedy on any future occasion.
7.8 Time is of the essence for the performance by the undersigned of
the oblige ons set forth in this Note.
3
7.9 Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
7.10 This Note cannot be changed, modified, amended or terminated
orally.
7.11 This Note shall be governed by, construed and enforced in
accordance with the laws of the State of Arizona, without reference to the
principles of conflicts of laws thereof.
7.12 THE UNDERSIGNED HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS
NOTE, AND ACKNOWLEDGES THAT LENDER ALSO WAIVES SUCH RIGHT.
8.0 Security For This Note.
This Note is secured pursuant to the Agreement and is subject to all
of the terms and conditions thereof, including, but not limited to, the
remedies specified therein.
IN WITNESS WHEREOF, this Note has been executed and delivered as of
the date first set forth above.
▇▇▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
/s/
Its Senior Vice President