Exhibit 10.01
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is
entered into as of May 28, 2009, by and between SOUTHWALL
TECHNOLOGIES INC., a Delaware corporation ("Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower has
requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to
Borrower on the terms and conditions contained herein.
NOW, THEREFORE,
for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as
follows:
ARTICLE I
CREDIT TERMS
SECTION
1.1. LINE OF CREDIT.
(a)
Line of Credit . Subject to the terms and
conditions of this Agreement, Bank hereby agrees to make advances
to Borrower from time to time up to and including June 1, 2010, not
to exceed at any time the aggregate principal amount of Three
Million Dollars ($3,000,000.00) ("Line of Credit"), the proceeds of
which shall be used to finance Borrower’s working capital
requirements. Borrower's obligation to repay advances
under the Line of Credit shall be evidenced by a promissory note
dated as of May 28, 2009 ("Line of Credit Note"), all terms of
which are incorporated herein by this reference.
(b)
Borrowing and Repayment . Borrower may from time
to time during the term of the Line of Credit borrow, partially or
wholly repay its outstanding borrowings, and reborrow, subject to
all of the limitations, terms and conditions contained herein or in
the Line of Credit Note; provided however, that Bank shall not be
obligated to make any advance which would cause the outstanding
principal balance of the Line of Credit to exceed $1,500,000.00
unless (i) Borrower has notified Bank in writing that it intends to
request such an advance at least 30 days prior to the date of such
requested advance, and (ii) Bank shall have performed and approved
an audit of Borrower’s accounts receivable (the
“Audit” - with Borrower liable for all
expenses thereof, including internally allocated costs and
expenses), and with the conditions in clauses (i) and (ii) referred
to as the “Borrowing Base Conditions.”
(c)
Limitation on Borrowings . Following
satisfaction of the Borrowing Base Conditions, outstanding
borrowings under the Line of Credit, shall at all times be
available in an amount equal to the lesser of $3,000,000.00 or the
Borrowing Base. The term “Borrowing Base” is
defined as an amount equal to the Specified Percentage of
Borrower's eligible accounts receivable. The term
“Specified Percentage” means a percentage (in no event
to exceed 80%) determined by Bank based on its review of the
Audit. Borrower acknowledges that in determining the
Specified Percentage, Bank will consider, among other items, the
rate of Borrower’s returns, rebates, discounts, credits and
allowances (the Dilution Rate”). If the Dilution
Rate increases materially, or if there at any time exists any other
matters, events, conditions or contingencies which Bank reasonably
believes may affect payment of any portion of Borrower's accounts,
Bank, in its sole discretion, may reduce the Specified Percentage
to a percentage appropriate to reflect such additional dilution
and/or establish additional reserves against Borrower's eligible
accounts receivable.
As used herein,
"eligible accounts receivable" shall consist solely of trade
accounts created in the ordinary course of Borrower's business,
upon which Borrower's right to receive payment is absolute and not
contingent upon the fulfillment of any condition whatsoever, and in
which Bank has a perfected security interest of first priority, and
shall not include:
(i)
any account which is unpaid 90 days after invoice date;
(ii)
that portion of any account for which there exists any right of
setoff, defense or discount (except regular discounts allowed in
the ordinary course of business to promote prompt payment) or for
which any defense or counterclaim has been asserted;
(iii)
any account which represents an obligation of any state or
municipal government or of the United States government or any
political subdivision thereof (except accounts which represent
obligations of the United States government and for which the
assignment provisions of the Federal Assignment of Claims Act, as
amended or recodified from time to time, have been complied with to
Bank's satisfaction);
(iv)
any account which represents an obligation of an account debtor
located in a foreign country other than an account debtor located
in a Canadian province or territory, so long as, in Bank's
determination, such Canadian jurisdiction recognizes Bank's first
priority security interest in and right to collect such account as
a consequence of any security agreements and UCC filings in favor
of Bank, except to the extent any such account, in Bank's
determination, is supported by a letter of credit or insured under
a policy of foreign credit insurance, in each case in form,
substance and issued by a party acceptable to Bank;
(v)
any account which arises from the sale or lease to or performance
of services for, or represents an obligation of, an employee,
affiliate, partner, member, parent or subsidiary of
Borrower;
(vi)
that portion of any account, which represents interim or progress
billings or retention rights on the part of the account
debtor;
(vii)any
account which represents an obligation of any account debtor when
twenty percent (20%) or more of Borrower's accounts from such
account debtor are not eligible pursuant to (i) above;
(viii)that
portion of any account from an account debtor which represents the
amount by which Borrower's total accounts from said account debtor
exceeds fifteen percent (15%) of Borrower's total accounts except
for Saint Gobain, V-Kool and Huper Optik Int’l, which respect
to which Bank shall establish a percentage following credit
verifications;
(ix)
any account deemed ineligible by Bank when Bank, in its sole
discretion, deems the creditworthiness or financial condition of
the account debtor, or the industry in which the account debtor is
engaged, to be unsatisfactory.
SECTION
1.2. INTEREST/FEES.
(a)
Interest . The outstanding principal balance of
each credit subject hereto shall bear interest at the rate of
interest set forth in each promissory note or other instrument or
document executed in connection therewith.
(b)
Computation and Payment . Interest shall be
computed on the basis of a 360-day year, actual days
elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or
document required hereby.
(c)
Commitment Fee . Borrower shall pay to Bank a
non-refundable commitment fee for the Line of Credit equal to
Twelve Thousand Dollars ($12,000.000), which fee shall be due and
payable in full on the date of this Agreement.
(d)
Unused Commitment Fee . Borrower shall pay to
Bank a fee equal to one-half percent (0.50%) per annum (computed on
the basis of a 360-day year, actual days elapsed) on the average
daily unused amount of the Line of Credit, which fee shall be
calculated on a calendar quarter basis by Bank and shall be due and
payable by Borrower in arrears on each June 30, September 30,
December 31 and March 31.
SECTION
1.3. COLLECTION OF PAYMENTS. Borrower authorizes
Bank to collect all interest and fees due under each credit subject
hereto by charging Borrower's deposit account number 4121-148894
with Bank, or any other deposit account maintained by Borrower with
Bank, for the full amount thereof. Should there be
insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately
due and payable by Borrower.
SECTION
1.4. COLLATERAL.
As security for
all indebtedness and other obligations of Borrower to Bank subject
hereto, Borrower hereby grants to Bank security interests of first
priority in all Borrower's accounts receivable and other rights to
payment, general intangibles, investment property, deposit
accounts, inventory and equipment.
All of the foregoing shall be evidenced by and
subject to the terms of such security agreements, financing
statements, deeds or mortgages, and other documents as Bank shall
reasonably require, all in form and substance satisfactory to
Bank. Borrower shall pay to Bank immediately upon demand
the full amount of all charges, costs and expenses (to include fees
paid to third parties and all allocated costs of Bank personnel),
expended or incurred by Bank in connection with any of the
foregoing security, including without limitation, filing and
recording fees and costs of appraisals, audits and title
insurance.
ARTICLE II
REPRESENTATIONS AND
WARRANTIES
Borrower makes
the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the
full and final payment, and satisfaction and discharge, of all
obligations of Borrower to Bank subject to this
Agreement.
SECTION
2.1. LEGAL STATUS. Borrower is a corporation, duly
organized and existing and in good standing under the laws of
Delaware, and is qualified or licensed to do business (and is in
good standing as a foreign corporation, if applicable) in all
jurisdictions in which such qualification or licensing is required
or in which the failure to so qualify or to be so licensed could
have a material adverse effect on Borrower.
SECTION
2.2. AUTHORIZATION AND VALIDITY. This Agreement
and each promissory note, contract, instrument and other document
required hereby or at any time hereafter delivered to Bank in
connection herewith (collectively, the "Loan Documents") have been
duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party
which executes the same, enforceable in accordance with their
respective terms.
SECTION
2.3. NO VIOLATION. The execution, delivery and
performance by Borrower of each of the Loan Documents do not
violate any provision of any law or regulation, or contravene any
provision of the Articles of Incorporation or By-Laws of Borrower,
or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a
party or by which Borrower may be bound.
SECTION
2.4. LITIGATION. There are no pending, or to the
best of Borrower's knowledge threatened, actions, claims,
investigations, suits or proceedings by or before any governmental
authority, arbitrator, court or administrative agency which could
have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to
Bank in writing prior to the date hereof.
SECTION
2.5. CORRECTNESS OF FINANCIAL STATEMENT. The
annual financial statement of Borrower dated December 31, 2008, and
all interim financial statements delivered to Bank since said date,
true copies of which have been delivered by Borrower to Bank prior
to the date hereof, (a) are complete and correct and present fairly
the financial condition of Borrower, (b) disclose all liabilities
of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated
or unliquidated, fixed or contingent, and (c) have been prepared in
accordance with generally accepted accounting principles
consistently applied. Since the dates of such financial
statements there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged,
pledged, granted a security interest in or otherwise encumbered any
of its assets or properties except in favor of Bank or as otherwise
permitted by Bank in writing.
SECTION
2.6. INCOME TAX RETURNS. Borrower has no
knowledge of any pending assessments or adjustments of its income
tax payable with respect to any year.
SECTION
2.7. NO SUBORDINATION. There is no agreement,
indenture, contract or instrument to which Borrower is a party or
by which Borrower may be bound that requires the subordination in
right of payment of any of Borrower's obligations subject to this
Agreement to any other obligation of Borrower.
SECTION
2.8. PERMITS, FRANCHISES. Borrower possesses, and
will hereafter possess, all permits, consents, approvals,
franchises and licenses required and rights to all trademarks,
trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION
2.9. ERISA. Borrower is in compliance in all
material respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended or recodified
from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a
"Plan"); no Reportable Event as defined in ERISA has occurred and
is continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting
principles.
SECTION
2.10. OTHER OBLIGATIONS. Borrower is not in
default on any obligation for borrowed money, any purchase money
obligation or any other material lease, commitment, contract,
instrument or obligation.
SECTION
2.11. ENVIRONMENTAL MATTERS. Except as
disclosed by Borrower to Bank in writing prior to the date hereof,
Borrower is in compliance in all material respects with all
applicable federal or state environmental, hazardous waste, health
and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or
properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource Conservation and Recovery Act of 1976, and the Federal
Toxic Substances Control Act, as any of the same may be amended,
modified or supplemented from time to time. None of the
operations of Borrower is the subject of any federal or state
investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic
or hazardous waste or substance into the
environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous
waste or substance into the environment.
ARTICLE III
CONDITIONS
SECTION
3.1. CONDITIONS OF INITIAL EXTENSION OF
CREDIT. The obligation of Bank to extend any credit
contemplated by this Agreement is subject to the fulfillment to
Bank's satisfaction of all of the following conditions:
(a)
Approval of Bank Counsel . All legal matters
incidental to the extension of credit by Bank shall be satisfactory
to Bank's counsel.
(b)
Documentation . Bank shall have received, in form
and substance satisfactory to Bank, each of the following, duly
executed:
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This Agreement
and each promissory note or other instrument or document required
hereby.
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Certificate of
Incumbency.
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Corporate
Resolution: Borrowing.
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Continuing
Security Agreement: Rights to Payment and Inventory.
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Security
Agreement Equipment.
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Such other
documents as Bank may require under any other Section of this
Agreement.
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(c)
Financial Condition . There shall have been no
material adverse change, as determined by Bank, in the financial
condition or business of Borrower, nor any material decline, as
determined by Bank, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of
Borrower.
(d)
Insurance . Borrower shall have delivered to Bank
evidence of insurance coverage on all Borrower's property, in form,
substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss payable
endorsements in favor of Bank.
SECTION
3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The
obligation of Bank to make each extension of credit requested by
Borrower hereunder shall be subject to the fulfillment to Bank's
satisfaction of each of the following conditions:
(a)
Compliance . The representations and warranties
contained herein and in each of the other Loan Documents shall be
true on and as of the date of the signing of this Agreement and on
the date of each extension of credit by Bank pursuant hereto, with
the same effect as though such representations and warranties had
been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act
which with the giving of notice or the passage of time or both
would constitute such an Event of Default, shall have occurred and
be continuing or shall exist.
(b)
Documentation . Bank shall have received all
additional documents which may be required in connection with such
extension of credit.
ARTICLE IV
AFFIRMATIVE
COVENANTS
Borrower
covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under
any of the Loan Documents remain outstanding, and until payment in
full of all obligations of Borrower subject hereto, Borrower shall,
unless Bank otherwise consents in writing:
SECTION
4.1. PUNCTUAL PAYMENTS. Punctually pay all
principal, interest, fees or other liabilities due under any of the
Loan Documents at the times and place and in the manner specified
therein , and immediately upon demand by Bank, the amount by which
the outstanding principal balance of any credit subject hereto at
any time exceeds any limitation on borrowings applicable
thereto.
SECTION
4.2. ACCOUNTING RECORDS. Maintain adequate books
and records in accordance with generally accepted accounting
principles consistently applied, and permit any representative of
Bank, at any reasonable time, to
