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CREDIT AGREEMENT
This Agreement is made by and between Earthshell Container Corporation,
A Delaware Corporation ("Borrower") and Imperial Bank, a California banking
corporation, ("Bank").
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:
1. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that, as of the date hereof,
1.01 EXISTENCE AND RIGHTS. Borrower is a Corporation duly organized and
existing and in good standing under the laws of Delaware, without limit as to
the duration of its existence and is authorized and in good standing to do
business in the State of California; Borrower has corporate powers and
adequate authority, rights and franchises to own its property and to carry on
its business as now conducted, and is duly qualified and in good standing in
each State in which the character of the properties owned by it therein or
the conduct of its business makes such qualification necessary; and Borrower
has the power and adequate authority to make and carry out this Agreement.
Borrower has no investment in any other business entity.
1.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement are duly authorized and do not require the consent or approval
of any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of Borrower's Articles of Incorporation, by-laws, as the case may
be, and this Agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
1.03 NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any
of its property may be bound or affected, and do not cause any lien, charge
or other encumbrance to be created or imposed upon any such property by
reason thereof.
1.04 LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower which if determined adversely to
Borrower or its interest would have a material adverse effect on the
financial condition of Borrower, and Borrower is not in default with respect
to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.
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1.05 FINANCIAL CONDITION. The balance sheet of Borrower as of December
31, 1995, a copy of which has heretofore been delivered to Bank by Borrower,
and all other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the
date thereof, and has been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date,
there have been no material adverse changes in the ordinary course of
business. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are
not reflected in said balance sheet, other than in the ordinary and normal
course of its business, which may have a materially adverse effect upon its
financial condition, operations or business as now conducted.
1.06 TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted
by Section 3.03 hereof.
1.07 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
1.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license
rights of others that would have a material adverse affect on the financial
condition of Borrower.
1.09 REGULATION U. The proceeds of the Loan shall not be used to
purchase or carry margin stock (as defined within Regulation U of the Board
of Governors of the Federal Reserve system).
2. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under that
certain promissory note in the face amount of $3,000,000, dated June 7, 1996
(the "Indebtedness"), it will, unless Bank shall otherwise consent in writing:
2.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2.02 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good
business judgment.
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2.03 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long
as:
a. The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
b. It shall have set aside on its books reserves (segregated to
the extent required by generally accepted accounting practice)
deemed by it adequate with respect thereto.
2.04 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access
to, and to examine its properties, books and records at all reasonable times
and upon reasonable notice during normal business hours; and furnish Bank:
a. QUARTERLY FINANCIAL STATEMENT. Within forty five (45) days
after the close of each quarter of each fiscal year of Borrower,
commencing with the quarter next ending, a balance sheet, profit
and loss statement and reconciliation of Borrower's capital
accounts as of the close of such period and covering operations for
the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail, prepared in accordance with
generally accepted accounting principles on a basis consistently
maintained by Borrower and certified by an appropriate officer of
Borrower;
b. ANNUAL FINANCIAL STATEMENT. As soon as available, and in any
event within ninety (90) days after the close of each fiscal year
of Borrower, a report of audit of Company as of the close of and
for such fiscal year, all in reasonable detail, prepared on an
audited basis by an independent certified public accountant
selected by Borrower and reasonably acceptable to Bank, in
accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower;
c. Upon request, within ninety (90) days after the end of the
fiscal year ended of Borrower, a certificate of the chief financial
officer of Borrower, stating that Borrower has performed and
observed each and every covenant contained in this Agreement to be
performed by it and that no event has occurred and no condition
then exists which constitutes an event of default hereunder or
would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein;
or, if any such event has occurred or any such condition exists,
specifying the nature thereof;
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d. Promptly after the receipt thereof by Borrower, copies of any
detailed audit reports submitted to Borrower by independent
accountants in connection with each annual or interim audit of the
accounts of Borrower made by such accountants;
e. Such other information relating to the affairs of Borrower as
the Bank reasonably may request from time to time;
f. In connection with each fiscal year end financial statements
furnished to Bank hereunder, any management letter of Borrower's
independent certified public accountant.
3. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank in
connection with the Indebtedness, it will not, without Bank's written consent:
3.01 TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business.
3.02 OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys, other than loans from the Bank, except
obligations now existing as shown in the financial statement dated December
31, 1995, and obligations owed to E. Khashoggi Industries and to equipment
vendors and excluding those obligations being refinanced by Bank, or sell or
transfer, either with or without recourse, any accounts or notes receivable
or any moneys due to become due.
3.03 LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage,
pledge, encumbrance, lien or charge of any kind upon any asset now owned,
other than liens for taxes not delinquent and liens in Bank's favor, except
for those already existing as of December 31, 1995 and a lien for purchase
money indebtedness on equipment.
3.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in the
securities of any person or other entity (excluding investments in joint
ventures or limited liability companies in the course of its business) other
than the United States Government; or guarantee or otherwise become liable
upon the obligation of any person or other entity, except by endorsement of
negotiable instruments for deposit or collection in the ordinary and normal
course of its business.
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3.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings
therefor; or sell any assets except in the ordinary and normal course of its
business as now conducted; or sell, lease, assign, or transfer any
substantial part of its business or fixed assets, (excluding the leasing or
contributions of equipment to venture partners) or any property or other
assets necessary for the continuance of its business as now conducted (other
than the sublicensing of Borrower's technology), including without limitation
the selling of any dividends, property or other asset accompanied by the
leasing back of the same.
3.06 CAPITAL EXPENDITURES. Make or incur obligations for capital
expenditures, which includes purchase money indebtedness or capital lease
obligations, in excess of $10,000,000 in fiscal year ending December 31, 1996
and in any fiscal year thereafter.
3.07 LEASE LIABILITY. Make or incur additional liability for payments
of rent under leases of real or personal property in excess of $500,000 in
fiscal year ending December 31, 1996 and in any fiscal year thereafter.
4. EVENTS OF DEFAULT
The occurrence of any of the following events of default shall, at
Bank's option, terminate Bank's commitment to lend and make all sums of
principal and interest then remaining unpaid on all Borrower's Indebtedness
to Bank immediately due and payable, all without demand, presentment or
notice, all of which are hereby expressly waived:
4.01 FAILURE TO PAY NOTE. Failure to pay any installment of principal
or interest on the Indebtedness.
4.02 BREACH OF COVENANT. Failure of Borrower to perform any other term
or condition of this Agreement binding upon Borrower.
4.03 BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or
misleading in any respect.
4.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
4.05 JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or
any of its assets and shall remain unvacated, unbonded or unstayed for a
period later than five days prior to the date of any proposed sale thereunder.
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4.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against Borrower and,
if instituted against it, shall be consented to.
5. MISCELLANEOUS PROVISIONS
5.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of Bank or any holder of Note issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement or the Note issued in
connection with the Indebtedness that Bank may make hereunder, are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
5.02 NOTICE OF DEFAULT. Borrower shall promptly notify Bank in writing
of the occurrence of any event of default hereunder or any event which upon
notice and lapse of time would be an event of default.
5.03 OPERATING ACCOUNTS. Borrower shall maintain primary accounts and
banking relationship with Bank during the term of the Indebtedness. Borrower
shall maintain, or cause to be maintained, on deposit with Imperial Bank,
non-interest bearing demand deposit balances sufficient to compensate Bank for
all services provided by Bank. Balances shall be calculated after reduction
for the reserve requirement of the Federal Reserve Board and uncollected
funds. Any deficiencies shall be charged directly to the Borrower on a
monthly basis.
5.04 ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand
after notice, with interest thereon from the date of expenditure at the rate
applicable to the Indebtedness, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising the
Indebtedness after the occurrence of an event of default, whether or not suit
is filed. If suit is brought to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees
and court costs in addition to any other remedy or recovery awarded by the
court.
5.05 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or
banker's lien.
5.06 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
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5.07 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby agree to submit.
5.08 OFFSET. In addition to an not in limitation of all rights of offset
that Bank or other holder of the Note evidencing the Indebtedness may have
under applicable law, Bank or other holder of the Note shall, upon the
occurrence of any Event of Default or any event which the passage of time or
notice would constitute such an Event of Default, have the right to
appropriate and apply to the payment of the Note any and all balances,
credits, deposits, accounts or monies of Borrower then or thereafter with
Bank or other holder, within ten (10) days after the Event of Default, and
notice of the occurrence of any Event of Default by Bank to Borrower.
5.09 SEVERABILITY. Should any one or more provisions of the Agreement
be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
5.10 TIME OF THE ESSENCE. Time is hereby declared to be of the essence
of this Agreement and of every part hereof.
5.11 INTEGRATION CLAUSES. Except for documents and instruments
specifically referenced herein, the Agreement constitutes the entire
agreement between Bank and Borrower regarding the Indebtedness, and all prior
communications verbal or written between Borrower and Bank shall be of no
further effect of evidentiary value. In the event of a conflict or
inconsistency among any other documents and instruments and this Agreement,
the provisions of this Agreement shall prevail.
5.12 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
5.13 This Agreement may be modified only by a writing signed by both
parties hereto.
Dated: June 7, 1996
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IMPERIAL BANK ("BANK")
By: /s/ Richard H. Myers, Jr.
---------------------------
Richard H. Myers, Jr.
Senior Vice President
EARTHSHELL CONTAINER CORPORATION ("BORROWER")
By: /s/ Scott Houston
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Scott Houston
Chief Financial Officer
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