LOAN AND SECURITY AGREEMENT
AMERICAN TECHNICAL CERAMICS CORP.
and
COMMERCE BANK, N.A.
Dated as of November 30, 2004
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated as of this 30th
day of November, 2004, by and between AMERICAN TECHNICAL CERAMICS CORP., a
Delaware corporation ("Borrower"), and COMMERCE BANK, N.A., a national banking
association ("Lender").
BACKGROUND
A. Borrower desires to establish financing arrangements with Lender and
Lender is willing to make loans and extensions of credit to Borrower under the
terms and provisions hereinafter set forth.
B. The parties desire to define the terms and conditions of their
relationship in writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the following terms have
the following respective meanings:
Account - All of the "accounts" (as that term is defined in the
UCC) of Borrower, whether now existing or hereafter arising.
Advance(s) - Any monies advanced or credit extended to Borrower
by Lender under the Revolving Credit, including without limitation,
cash advances and the issuance of Letters of Credit.
Advance Request - Section 2.4(b)(iii)
Affiliate - With respect to any Person, (a) any Person which,
directly or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, such Person, or
(b) any Person who is a director or officer (i) of such Person, (ii)
of any Subsidiary of such Person, or (iii) any person described in
clause (a) above. For purposes of this definition, control of a Person
shall mean the power, direct or indirect, (x) to vote 10% or more of
the Capital Stock having ordinary voting power for the election of
directors (or comparable equivalent) of such Person, or (y) to direct
or cause the direction of the management and policies of such Person
whether by contract or otherwise. Control may be by ownership,
contract, or otherwise.
Asset Sale - The sale, transfer, lease, license or other
disposition, by Borrower or by any Domestic Subsidiary of Borrower to
any Person other than Borrower or a Domestic Subsidiary of Borrower of
any Property now owned or hereafter acquired, of any nature whatsoever
in any transaction or series of related transactions other than the
sale of inventory in the ordinary course of business, the sale of raw
materials in excess of what management believes is necessary based
upon
existing levels of business and the sale of machinery, equipment and
other assets no longer used or useful in Borrower's or any such
Domestic Subsidiary's business. An Asset Sale includes, without
limitation, a division.
Authorized Officer - Any officer (or comparable equivalent) of
Borrower authorized by specific resolution of Borrower to request
Advances or execute Quarterly Compliance Certificates as set forth in
the incumbency certificate referred to in Section 4.1(d) of this
Agreement.
Base Rate - The "Prime Rate" of interest as published in the
"Money Rates" section of The Wall Street Journal on the applicable
date (or the highest "Prime Rate" if more than one is published) as
such rate may change from time to time. If The Wall Street Journal
ceases to be published or goes on strike or is otherwise not
published, Lender may use a similar published prime or base rate. The
Base Rate is not necessarily the lowest or best rate of interest
offered by Lender to any borrower or class of borrowers.
Business Day - A day other than Saturday or Sunday when Lender is
open for business in New York.
Capitalized Lease Obligations - Any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, consistently
applied.
Capital Stock - Any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all other ownership interests in a Person (other
than a corporation) and any and all warrants or options to purchase
any of the foregoing.
Change of Control - With respect to Surety, the result caused by
the occurrence of any event which results in Borrower owning
(beneficially, legally or otherwise), in the aggregate, less than 100%
of any class of the issued and outstanding Capital Stock of Guarantor
entitled to vote.
Closing - Section 4.6.
Closing Date - Section 4.6.
Collateral - All of the Property and interests in Property
described in Section 3.1 of this Agreement, which Property and
interests in Property secure payment of the Obligations and
satisfaction by Borrower of all covenants and undertakings contained
in this Agreement and the other Loan Documents.
Consolidated Subsidiary or in the plural Consolidated
Subsidiaries will mean any other domestic corporation, limited
liability company or other entity of which at least 50% of the voting
stock (or membership interest, as the case may be) is owned by Company
directly, or indirectly, through one or more Consolidated
Subsidiaries, and each of their respective successors and/or assigns.
Default - Any event, act, condition or occurrence which with
notice, or lapse of time or both, would constitute an Event of Default
hereunder.
Disqualified Stock - Any Capital Stock which by its terms (or by
the terms of any security into which it is convertible or for which it
is exchangeable) or upon the happening of any event (i) matures or is
mandatorily redeemable for any
2
reason, (ii) is convertible or exchangeable for Indebtedness or
Capital Stock that meets the requirements of clauses (i) and (ii), or
(iii) is redeemable at the option of the holder thereof, in whole or
in part, in each case on or prior to the Revolving Credit Maturity
Date.
Domestic Subsidiary - Any subsidiary of Borrower which is
organized under the laws of the United States or any State the
principal business activities of which are conducted in the United
States. As of the date hereof, Borrower's only domestic subsidiary is
American Technical Ceramics (Florida), Inc.
Environmental Laws - Any and all Federal, foreign, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees and any and all common law requirements, rules and
bases of liability regulating, relating to or imposing liability or
standards of conduct concerning pollution, protection of the
environment, or the impact of pollutants, contaminants or toxic or
hazardous substances on human health or the environment, as now or may
at any time hereafter be in effect.
ERISA - The Employee Retirement Income Security Act of 1974, as
the same may be amended, from time to time.
Event of Default - Section 8.1.
Expenses - Section 9.6.
GAAP - Generally accepted accounting principles as in effect in
the United States on the date of determination.
Governmental Acts - Section 2.2(f).
Governmental Authority - Any federal, state or local government
or political subdivision, or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any
court, tribunal or grand jury.
Hazardous Substances - Any substances defined or designated as
hazardous or toxic waste, hazardous or toxic material, hazardous or
toxic substance or similar term, under any Environmental Law.
Indebtedness - Of any Person at any date, without duplication,
(i) all indebtedness of such Person for borrowed money (including with
respect to Borrower, the Obligations) or for the deferred purchase
price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance
with customary practices), (ii) any other indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument,
(iii) all Capitalized Lease Obligations of such Person, (iv) the face
amount of all letters of credit issued for the account of such Person
and all drafts drawn thereunder, (v) all obligations of other Persons
which such Person has guaranteed, (vi) Disqualified Stock, (vii) all
Obligations of such Person under Hedging Agreements, and (viii) all
liabilities secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for
the payment thereof.
Inventory - All of the "inventory" (as that term is defined in
the UCC) of Borrower, whether now existing or hereafter acquired or
created.
IRS - Internal Revenue Service.
3
L/C Commitment - The sum of Two Million Dollars ($2,000,000.00).
L/C Fees - Section 2.7(c).
Letters of Credit - (i) Standby letters of credit, and (ii)
commercial letter or letters of credit, in each case issued to or to
be issued by Lender for the account of Borrower pursuant to Section
2.2 herein. Drafts under commercial letters of credit may be payable
at sight and/or payable thirty (30) days after sight.
Letter of Credit Amount - The sum of (i) the aggregate undrawn
amount of all Letters of Credit outstanding at any time plus (ii) the
aggregate amount of all drawings under Letters of Credit for which
Lender has not been reimbursed at such time.
Letter of Credit Documents - Any Letter of Credit, any amendment
thereto, any documents delivered in connection therewith, any
application therefor, or any other documents (all in form and
substance satisfactory to Lender), governing or providing for (i) the
rights and obligations on the parties concerned or at risk, or (ii)
any collateral security for such obligations.
Leverage Ratio - At any time, the ratio of Borrower's (i)
Indebtedness to (ii) Tangible Net Worth.
Lien - Any interest of any kind or nature in property securing an
obligation owed to, or a claim of any kind or nature in property by, a
Person other than the owner of the Property, whether such interest is
based on the common law, statute, regulation or contract, and
including, but not limited to, a security interest or lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust
receipt, a lease, consignment or bailment for security purposes, a
trust, or an assignment. For the purposes of this Agreement, Borrower
shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement or other arrangement
pursuant to which title to the Property has been retained by or vested
in some other Person for security purposes.
Loans - The unpaid balance of Advances under the Revolving
Credit.
Loan Documents - Collectively, this Agreement, the Note, the
Surety Agreement, the Letter of Credit Documents, the Perfection
Certificate, and all agreements, instruments and documents executed
and/or delivered in connection therewith, all as may be supplemented,
restated, superseded, amended or replaced from time to time.
Material Adverse Effect - A material adverse effect upon (a) the
business, operations or financial condition of the Borrower or any
guarantor, as applicable, or (b) the validity or enforceability of
this Agreement or any of the other material Loan Documents or the
rights and remedies of Lender hereunder or thereunder.
Maximum Revolving Credit Amount - The sum of Five Million Dollars
($5,000,000.00).
Note - the Revolving Credit Note.
Obligations - All existing and future debts, liabilities and
obligations of every kind or nature at any time owing by Borrower to
Lender, whether under
4
this Agreement, or any other existing or future instrument, document
or agreement, between Borrower or Lender, whether joint or several,
related or unrelated, primary or secondary, matured or contingent, due
or to become due (including debts, liabilities and obligations
obtained by assignment), and whether principal, interest, fees,
indemnification obligations hereunder or Expenses (specifically
including interest accruing after the commencement of any bankruptcy,
insolvency or similar proceeding with respect to Borrower, whether or
not a claim for such post-commencement interest is allowed),
including, without limitation, debts, liabilities and obligations in
respect of the Revolving Credit and the Reimbursement Obligations, and
any extensions, modifications, substitutions, increases and renewals
thereof; any amount payable by Borrower or any Domestic Subsidiary of
Borrower pursuant to an Interest Hedging Instrument; the payment of
all amounts advanced by Lender to preserve, protect and enforce rights
hereunder and in the Collateral; and all Expenses incurred by Lender.
Without limiting the generality of the foregoing, Obligations shall
include any other debts, liabilities or obligations owing to Lender in
connection with any Lock Box, cash management or other services
(including electronic funds transfers or automated clearing house
transactions) provided by Lender to Borrower, as well as any other
loan, advances or extension of credit, under any existing or future
loan agreement, promissory note, or other instrument, document or
agreement between Borrower and Lender.
Original Holder - the holder of the Note.
Overadvance - Section 2.1(a)(i).
PBGC - The Pension Benefit Guaranty Corporation.
Perfection Certificate - The Perfection Certificate provided by
Borrower to Lender on or prior to the Closing Date in form and
substance satisfactory to Lender.
Permitted Liens - (a) Liens securing taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, and other like persons
not yet due; (b) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance, social security and other like laws; (c) Liens
on fixed assets security purchase money Indebtedness permitted under
Section 7.6; provided that, (i) such Lien attached to such assets
concurrently, or within 20 days of the acquisition thereof, and only
to the assets so acquired, and (ii) a description of the asset
acquired is furnished to Lender; (d) deposits to secure performance of
bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like
nature; (e) Liens resulting from a filing by a lessor as a
precautionary filing for a true lease; (f) customary landlord's Liens
under leases; (g) vendors' Liens to secure payments; and (h) Liens
existing on the Closing Date and shown on Schedule "1.1(b)" attached
hereto and made part hereof.
Person - An individual, partnership, corporation, trust, limited
liability company, limited liability partnership, unincorporated
association or organization, joint venture or any other entity.
Property - Any interest of Borrower in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
5
Regulation D - Regulation D of the Board of Governors of the
Federal Reserve System comprising Part 204 of Title 12, Code of
Federal Regulations, as amended, and any successor thereto.
Reimbursement Obligations - Section 2.2(c).
Revolving Credit - Section 2.1(a).
Revolving Credit Closing Fee - Section 2.7(a).
Revolving Credit Maturity Date - November 30, 2005, or such later
date as Lender may, in its sole and absolute discretion, designate in
writing to Borrower.
Revolving Credit Note - Section 2.1(b).
Subsidiary - With respect to any Person at any time, (i) any
corporation more than fifty percent (50%) of whose voting stock is
legally and beneficially owned by such Person or owned by a
corporation more than fifty percent (50%) of whose voting stock is
legally and beneficially owned by such Person; (ii) any trust of which
a majority of the beneficial interest is at such time owned directly
or indirectly, beneficially or of record, by such Person or one or
more Subsidiaries of such Person; and (iii) any partnership, joint
venture, limited liability company or other entity of which ownership
interests having ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions are
at such time owned directly or indirectly, beneficially or of record,
by, or which is otherwise controlled directly, indirectly or through
one or more intermediaries by, such Person or one or more Subsidiaries
of such Person.
Surety - American Technical Ceramics (Florida), Inc., and any
other Person who may hereafter guaranty, as surety, all of the
Obligations.
Surety Agreement - That certain surety agreement to be executed
by such Surety in favor of Lender, in form and substance satisfactory
to Lender, on or prior to the Closing Date.
Tangible Net Worth - At any time, the amount by which all of
Borrower's consolidated assets (less (i) trademarks, copyrights,
goodwill, covenants not to compete, and all other assets which would
be classified as intangible assets under GAAP; and (ii) assets owing
from Affiliates, officers, directors, shareholders and employees),
exceed all of Borrower's consolidated liabilities, all as would be
shown on Borrower's consolidated balance sheet prepared in accordance
with GAAP.
UCC - The Uniform Commercial Code as adopted in the state where
Lender's office identified in Section 9.8 is located, as the same may
be amended from time to time.
Other Capitalized Terms - Inventory, Proceeds and any other
capitalized terms used without further definition herein shall have
the respective meaning set forth in the UCC.
1.2 Accounting Principles: Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in
6
accordance with GAAP, consistently applied, to the extent applicable, except as
otherwise expressly provided in this Agreement.
1.3 Construction: No doctrine of construction of ambiguities in
agreements or instruments against the interests of the party controlling the
drafting shall apply to any Loan Documents.
SECTION II. THE LOANS
2.1 Revolving Credit - Description:
a. Subject to the terms and conditions of this Agreement, Lender
hereby establishes for the benefit of Borrower a revolving credit facility
(collectively, the "Revolving Credit") which shall include cash Advances
extended by Lender to or for the benefit of Borrower as well as Letters of
Credit issued for the account of Borrower from time to time hereunder. The
aggregate principal amount of unpaid cash Advances, plus the Letter of Credit
Amount, shall not at any time exceed the Maximum Revolving Credit Amount.
Subject to such limitation, the outstanding balance of Advances under the
Revolving Credit may fluctuate from time to time, to be reduced by repayments
made by Borrower, to be increased by future Advances which may be made by
Lender, to or for the benefit of Borrower, and, subject to the provisions of
Section 8 below, shall be due and payable on the Revolving Credit Maturity Date.
If the aggregate principal amount of unpaid cash Advances, plus the Letter of
Credit Amount at any time exceeds the Maximum Revolving Credit Amount (such
excess referred to as "Overadvance"), Borrower shall immediately repay the
Overadvance in full.
b. At Closing, Borrower shall execute and deliver a promissory note
to Lender for the Maximum Revolving Credit Amount ("Revolving Credit Note"). The
Revolving Credit Note shall evidence Borrower's unconditional obligation to
repay Lender for all Advances made under the Revolving Credit, with interest as
herein provided. Each Advance under the Revolving Credit shall be deemed
evidenced by the Revolving Credit Note, which is deemed incorporated herein by
reference and made part hereof. The Revolving Credit Note shall be in form and
substance satisfactory to Lender.
c. The term of the Revolving Credit shall expire on the Revolving
Credit Maturity Date. On such date, unless having been sooner accelerated by
Lender pursuant to the terms hereof, and without impairing any rights under
Section 3.1, all sums owing under the Revolving Credit shall be due and payable
in full, and as of and after such date Borrower shall not request and Lender
shall not make any further Advances under the Revolving Credit.
2.2 Letters of Credit:
a. As a part of the Revolving Credit and subject to its terms and
conditions, Lender shall make available to Borrower Letters of Credit which
shall not exceed, in the aggregate at any one time outstanding, the L/C
Commitment. Notwithstanding the foregoing, all Letters of Credit shall be in
form and substance reasonably satisfactory to Lender. No Letter of Credit shall
be issued with an expiry date later than (i) three hundred sixty five (365) days
from the date of issuance for a stand-by letter of credit, or one hundred eighty
(180) days from the date of insurance for documentary letter of credit, or (ii)
ten (10) Business Days prior to the Revolving Credit Maturity
7
Date. Borrower shall execute and deliver to Issuer all Letter of Credit
Documents required by Lender for such purposes. Each Letter of Credit shall
comply with the Letter of Credit Documents.
b. Each Letter of Credit issued from time to time under the
Revolving Credit which remains undrawn (and the amounts of draws on Letters of
Credit prior to payment as hereinafter set forth) shall reduce, dollar for
dollar, the amount available to be borrowed by Borrower under the Revolving
Credit.
c. In the event of any request for drawing under any Letter of
Credit by the beneficiary thereof, Lender shall promptly notify Borrower and
Borrower shall immediately reimburse Lender on the day when such drawing is
honored, by either a cash payment by Borrower or, so long as no Event of Default
has occurred and is continuing, in lieu of such payment by Borrower, and at
Borrower's option, by Lender automatically making or having been deemed to have
made (without further request of Borrower) a cash Advance under the Revolving
Credit on such date to reimburse Lender. Borrower's reimbursement obligation for
draws under Letters of Credit along with the obligation to pay L/C Fees shall
herein be referred to collectively as Borrower's "Reimbursement Obligations."
All of Borrower's Reimbursement Obligations hereunder with respect to Letters of
Credit shall apply unconditionally and absolutely to Letters of Credit issued
hereunder on behalf of Borrower.
d. The obligation of Borrower to reimburse Lender for drawings made
(or for cash Advances made to cover drawings made) under the Letters of Credit
shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including, without
limitation, the following circumstances:
i. any lack of validity or enforceability of any Letter of
Credit;
ii. the existence of any claim, setoff, defense or other right
that Borrower or any other Person may have at any time against a beneficiary or
any transferee of any Letter of Credit (or any persons or entities for whom any
such beneficiary or transferee may be acting), Lender or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction;
iii. any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
iv. payment by Lender under any Letter of Credit against
presentation of a demand, draft or certificate or other document that does not
comply with the terms of such Letter of Credit unless Lender shall have acted
with willful misconduct or gross negligence in issuing such payment;
v. any other circumstances or happening whatsoever that is
similar to any of the foregoing; or
vi. the fact that a Default or Event of Default shall have
occurred and be continuing.
8
e. If by reason of (i) any change after the Closing Date in applicable law,
regulation, rule, decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory authority of any
law, regulation, rule, decree or regulatory requirement or (ii) compliance by
Lender with any direction, reasonable request or requirement (whether or not
having the force of law) of any governmental or monetary authority including,
without limitation, Regulation D:
i. Lender shall be subject to any tax or other levy or charge of
any nature or to any variation thereof (except for changes in the rate of any
tax on the net income of Lender or its applicable lending office) or to any
penalty with respect to the maintenance or fulfillment of its obligations under
this Section 2.2, whether directly or by such being imposed on or suffered by
Lender;
ii. any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued by
Lender; or
iii. there shall be imposed on Lender any other condition
regarding this Section 2.2 or any Letter of Credit; and the result of the
foregoing is to directly or indirectly increase the cost to Lender of issuing,
creating, making or maintaining any Letter of Credit or to reduce the amount
receivable in respect thereof by Lender, then and in any such case, Lender
shall, after the additional cost is incurred or the amount received is reduced,
notify Borrower and Borrower shall pay on demand such amounts as may be
necessary to compensate Lender for such additional cost or reduced receipt,
together with interest on such amount from the tenth Business Day after the date
demanded until payment in full thereof at a rate per annum equal at all times to
the applicable interest rate under the Revolving Credit. A certificate signed by
an officer of Lender as to the amount of such increased cost or reduced receipt
showing in reasonable detail the basis for the calculation thereof, submitted to
Borrower by Lender shall, except for manifest error and absent written notice
from Borrower to Lender within ten (10) days from submission, be final,
conclusive and binding for all purposes.
f. i. In addition to amounts payable as elsewhere provided in this
Section 2.2, without duplication, Borrower hereby agrees to protect, indemnify,
pay and save Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which Lender may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of the Letters of Credit, or (B) the
failure of Lender to honor a drawing under any Letter of Credit as a result of
any such act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority (all such acts or
omissions herein called "Government Acts") in each case except for claims,
demands, liabilities, damages, losses, costs, charges and expenses a rising
solely from acts or conduct of Lender constituting gross negligence or willful
misconduct.
ii. As between Borrower and Lender, Borrower assumes all risks
of the acts and omissions of or misuse of the Letters of Credit issued by Lender
by the respective beneficiaries of such Letters of Credit. In furtherance and
not in limitation of the foregoing, Lender shall not be responsible: (A) for the
form, validity, sufficiency, accuracy, genuineness or legal effects of any
document submitted by any party in connection with the application for and
issuance of such Letters of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits
9
thereunder or proceeds thereof, in whole or in part, that may prove to
be invalid or ineffective for any reason; (C) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit; (D) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they are in cipher, unless any of the
foregoing are caused by Lender's gross negligence or willful misconduct; (E) for
errors in interpretation of technical terms; (F) for any loss or delay in the
transmission of any document or required in order to make a drawing under such
Letter of Credit or of the proceeds thereof, unless caused by Lender's gross
negligence or willful misconduct; (G) for the misapplication by the beneficiary
of any such Letter of Credit of the proceeds of any drawing under such Letter of
Credit; and (H) for any consequences arising from causes beyond the control of
Lender, including, without limitation, any Government Acts. None of the above
shall affect, impair or prevent the vesting of any of Lender's rights or powers
hereunder
iii. In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by Lender
in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not create any liability
on the part of Lender to Borrower.
2.3 Intentionally Deleted Prior to Execution
2.4 Advances and Payments:
a. Except to the extent otherwise set forth in this Agreement, all
payments of principal and of interest on the Revolving Credit, Reimbursement
Obligations, and all Expenses, fees, indemnification obligations and all other
charges and any other Obligations of Borrower, shall be made to Lender at its
regional banking office, Greenway Plaza Office Park, 000 Xxxxxxxx Xxxx,
Xxxxxxxx, Xxx Xxxx 00000, in United States dollars, in immediately available
funds. Upon the occurrence and during the continuance of an Event of Default,
Lender shall have the right (and Borrower hereby authorizes Lender) to charge
Borrower's operating and/or deposit account(s) for all of Borrower's Obligations
as they may thereafter become due from time to time under this Agreement
including, without limitation, interest, principal, fees, indemnification
obligations and reimbursement of Expenses. Provided that no Event of Default has
occurred and is continuing, if Borrower so requests, Lender shall hereby
authorizes Lender to make a cash Advance under the Revolving Credit in a sum
sufficient to pay all interest accrued and payable on the Obligations and to pay
all costs, fees and Expenses owing hereunder. Any payments received prior to
2:00 p.m. Eastern time on any Business Day shall be deemed received on such
Business Day. Any payments (including any payment in full of the Obligations),
received after 2:00 p.m. Eastern time on any Business Day shall be deemed
received on the immediately following Business Day.
b. Cash Advances which may be made by Lender from time to time
under the Revolving Credit shall be made available by crediting such proceeds to
Borrower's operating account with Lender.
i. All cash Advances requested by Borrower under the Revolving
Credit must be in the minimum amount of One Hundred Thousand Dollars
($100,000.00) and integral multiples of One Hundred Thousand Dollars
($100,000.00) in excess thereof. All cash Advances under the Revolving Credit
must be requested by 11:00 A.M., Eastern time, on the date such cash Advance is
to be made.
10
ii. All requests for an Advance are to be in writing pursuant to
a written request executed by an Authorized Officer in the form of Exhibit "A"
("Advance Request") attached hereto and made part hereof. Such request may be
sent by telecopy or facsimile transmission provided that Lender shall have the
right to require that receipt of such request not be effective unless confirmed
via telephone with Lender.
iii. Upon receiving a request for an Advance in accordance with
subparagraph (ii) above, and subject to the conditions set forth in this
Agreement, Lender shall make the requested Advance available to Borrower as soon
as is reasonably practicable thereafter on the day the requested Advance is to
be made.
2.5 Interest: The unpaid principal balance of cash Advances under the
Revolving Credit shall bear interest, subject to the terms hereof, at the per
annum rate equal to the Base Rate, with a floor of 4%. Changes in the interest
rate applicable to the Revolving Credit shall become effective on the same day
that there is a change in the Base Rate. Interest on the Revolving Credit shall
be payable monthly, in arrears, on the first day of each calendar month,
beginning on the first day of the first full calendar month after the Closing
Date.
2.6 Additional Interest Provisions:
a. Interest on the Loans shall be calculated on the basis of a year
of three hundred sixty (360) days but charged for the actual number of days
elapsed.
b. After the occurrence and during the continuance of an Event of
Default hereunder, the per annum effective rate of interest on all outstanding
principal under the Loans, shall be increased by three hundred (300) basis
points. All such increases may be applied retroactively to the date of the
occurrence of the Event of Default. Borrower agrees that the default rate
payable to Lender is a reasonable estimate of Lender's damages and is not a
penalty.
c. All contractual rates of interest chargeable on outstanding
principal under the Loans shall continue to accrue and be paid even after
Default, an Event of Default, maturity, acceleration, judgment, bankruptcy,
insolvency proceedings of any kind or the happening of any similar event or
occurrence.
d. In no contingency or event whatsoever shall the aggregate of all
amounts deemed interest hereunder and charged or collected pursuant to the terms
of this Agreement exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such court determines Lender has charged or received
interest hereunder in excess of the highest applicable rate, Lender shall apply
such excess interest received by Lender against other Obligations due under this
Agreement and such rate shall automatically be reduced to the maximum rate
permitted by such law.
2.7 Fees and Charges:
a. Borrower shall pay to Lender a fee in the amount of (i) two
percent (2%) per annum of the face amount of each standby Letter of Credit
issued by Lender if such standby Letter of Credit is non-cash secured, or one
percent (1%) per annum of the face amount of each standby Letter of Credit
issued by Lender if such standby Letter of Credit is fully cash secured. Such
fee shall be payable quarterly in arrears on the first day of each calendar
quarter and at the expiration or
11
termination of the standby Letter of Credit. In addition, Borrower shall pay to
Lender, upon billing therefor, all of Lender's standard commissions for the
issuance of banker's acceptances and standard charges for issuance, amendment,
extension and cancellation of the standby Letter of Credit. All such fees and
charges are referred to herein collectively as the "L/C Fees."
b. Borrower shall unconditionally pay to Lender a late charge equal
to five percent (5%) of any and all payments of principal or interest on the
Loans that are not paid within fifteen (15) days of the due date, after notice
is provided by the Lender. Such late charge shall be due and payable regardless
of whether Lender has accelerated the Obligations. Borrower agrees that any late
fee payable to Lender is a reasonable estimate of Lender's damages and is not a
penalty.
c. At Closing, Lender shall have fully earned and Borrower shall
unconditionally pay to Lender, a non-refundable fee with respect to the
Revolving Credit ("Revolving Credit Closing Fee") of Twenty-Five Thousand
Dollars ($25,000.00).
2.8 Prepayments: Borrower may prepay the Revolving Credit in whole or
in part at any time or from time to time, without penalty or premium. Any
prepayment shall be accompanied by all accrued and unpaid interest.
2.9 Use of Proceeds: The extensions of credit under and proceeds of the
Revolving Credit shall be used for working capital and general corporate
purposes.
2.10 Capital Adequacy: If any present or future law, governmental rule,
regulation, policy, guideline, directive or similar requirement (whether or not
having the force of law) imposes, modifies, or deems applicable any capital
adequacy, capital maintenance or similar requirement which affects the manner in
which Lender allocates capital resources to its commitments (including any
commitments hereunder), and as a result thereof, in the opinion of Lender, the
rate of return on Lender's capital with regard to the Loans is reduced to a
level below that which Lender could have achieved but for such circumstances,
then in such case and upon notice from Lender to Borrower, from time to time,
Borrower shall pay Lender such additional amount or amounts as shall compensate
Lender for such reduction in Lender's rate of return. Such notice shall contain
the statement of Lender with regard to any such amount or amounts which shall,
in the absence of manifest error, be binding upon Borrower. In determining such
amount, Lender may use any reasonable method of averaging and attribution that
it deems applicable.
SECTION III. COLLATERAL
3.1 Collateral: As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents, Borrower hereby assigns and grants to
Lender, a continuing Lien on and security interest in, upon the following
Property, all whether now owned or hereafter acquired, created or arising and
wherever located:
a. Accounts - All Accounts;
b. Inventory - All Inventory; and
c. Proceeds - The Proceeds (including, without limitation,
insurance proceeds), whether cash or non-cash, of all of the foregoing property
described in clauses (a) and (b).
12
3.2 Lien Documents: At Closing and thereafter as Lender deems
necessary, Borrower shall execute and/or deliver to Lender, or have executed and
delivered (all in form and substance satisfactory to Lender and its counsel):
a. Financing statements pursuant to the UCC, which Lender may file
in the jurisdiction where Borrower is organized and in any other jurisdiction
that Lender deems appropriate;
b. Any other agreements, documents, instruments and writings
reasonably required by Lender to evidence, perfect or protect the Liens and
security interests in the Collateral; excluding though amendments that add
additional collateral without Borrower's consent in writing in each instance.
3.3 Other Actions:
a. All items for which Lender must receive possession to obtain a
perfected security interest, including without limitation, all notes, stock
powers, letters of credit, certificates and documents of title, Chattel Paper,
Warehouse Receipts, Instruments, and any other similar instruments constituting
Collateral.
b. Lender is hereby authorized to file financing statements and
amendments to financing statements without Borrower's signature, in accordance
with the UCC. Borrower hereby authorizes Lender to file all such financing
statements and amendments to financing statements describing the Collateral in
any filing office as Lender, in its sole discretion may determine, but
specifically excluding amendments that add additional collateral to the
collateral description therein.
3.4 Searches, Certificates:
a. Lender shall, prior to or at Closing, and thereafter as Lender
may determine from time to time, at Borrower's expense, obtain the following
searches (the results of which are to be consistent with the warranties made by
Borrower in this Agreement):
i. UCC searches with the Secretary of State and local filing
office of each state where Borrower is organized, maintains its executive
office, a place of business, or assets; and
ii. Judgment, state and federal tax lien and corporate tax lien
searches, in all applicable filing offices of each state searched under
subparagraph (i) above.
b. Borrower shall, prior to or at Closing and at its expense,
obtain and deliver to Lender good standing certificates showing Borrower to be
in good standing in its state of organization and in each other state in which
it is doing and presently intends to do business for which qualification is
required.
3.5 Landlord's and Warehouseman's Waivers: Borrower will cause each
owner of any premises occupied by Borrower or to be occupied by Borrower and
each warehouseman of any warehouse, where, in either event Collateral is held,
to execute and deliver to Lender an instrument, in form and substance
satisfactory to Lender, under which such owner(s) or warehouseman
13
subordinates its/his/their interests in and waives its/his/their right to
distrain on or foreclose against the Collateral and agrees to allow Lender to
remain on such premises to dispose of or deal with any Collateral located
thereon.
3.6 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.7 Power of Attorney: Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrower (without requiring any of them to act as such) with full power of
substitution to do the following (but only effective upon the occurrence and
during the continuance of an Event of Default): (a) endorse the name of Borrower
upon any and all checks, drafts, money orders and other instruments for the
payment of monies that are payable to Borrower and constitute collections on
Borrower's Accounts or proceeds of other Collateral; (b) execute and/or file in
the name of Borrower any financing statements, schedules, assignments,
instruments, documents and statements that Borrower is obligated to give Lender
hereunder or is necessary to perfect (or continue or evidence the perfection of
such security interest or Lien) Lender's security interest or Lien in the
Collateral; and (c) during the continuance of an Event of Default, do such other
and further acts and deeds in the name of Borrower that Lender may reasonably
deem necessary or desirable to enforce any Account or other Collateral.
SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing under this Agreement is subject to the following conditions
precedent (all instruments, documents and agreements to be in form and substance
satisfactory to Lender and Lender's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrower shall have
delivered, or caused to be delivered to Lender the following:
a. this Agreement, the Note and each of the other Loan Documents
all properly executed;
b. financing statements and each of the other documents to be
executed and/or delivered by Borrower or any other Person pursuant to this
Agreement;
c. certified copies of (i) resolutions of Borrower's and Surety's
boards of directors or managing members (as applicable) authorizing the
execution, delivery and performance of this Agreement, the Note and each of the
other Loan Documents required to be delivered by any Section hereof, and (ii)
Borrower's and Surety's articles or certificate of incorporation and by-laws or
certificate of formation and operating agreement, as applicable;
d. an incumbency certificate for Borrower identifying all
Authorized Officers, with specimen signatures and an incumbency certificate for
Surety identifying all individuals authorized to execute a Surety Agreement with
specimen signatures;
e. a written opinion of Borrower's and Surety's independent counsel
addressed to Lender and opinions of such other counsel as Lender deems
reasonably necessary;
14
f. a collateral audit of Borrower's assets, liabilities, books and
records, satisfactory in all respects to Lender;
g. such financial statements, reports, certifications and other
operational information as Lender may reasonably require, satisfactory in all
respects to Lender;
h. certification by the Vice President-Controller of Borrower that
since September 30, 2004 no event has occurred which has had or could reasonably
be expected to have a Material Adverse Effect;
i. payment by Borrower of all fees including, without limitation,
Revolving Credit Closing Fee, and Expenses associated with the Loans;
j. Searches and certificates required under Section 3.4; and
k. such other documents reasonably required by Lender.
4.2 Absence of Certain Events: At the Closing Date, no Default or Event
of Default hereunder shall have occurred and be continuing.
4.3 Warranties and Representations at Closing: The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all material respects on the Closing Date
with the same effect as though made on and as of that date, except, in all
cases, to the extent that such warranties and representations speak as of a
specific date, in which case they shall be deemed to have been made again on and
as of the Closing Date but speak only as of such specific date, Borrower shall
not have taken any action or permitted any condition to exist which would have
been prohibited by any Section hereof.
4.4 Compliance with this Agreement: Borrower shall have performed and
complied in all material respects with all agreements, covenants and conditions
contained herein, including, without limitation, the provisions of Sections 6
and 7 hereof, which are required to be performed or complied with by Borrower
before or at the Closing Date.
4.5 Officers' Certificate: Lender shall have received a certificate
dated the Closing Date and signed by the chief financial officer of Borrower
certifying that all of the conditions specified in this Sections 4.2, 4.3 and
4.4 hereof have been fulfilled in all material respects.
4.6 Closing: Subject to the conditions of this Section, the Loans shall
be made available on such date (the "Closing Date") and at such time as may be
mutually agreeable to the parties contemporaneously with the execution hereof
("Closing") at the Lender's counsel's offices.
4.7 Waiver of Rights: By completing the Closing hereunder, or by making
Advances hereunder, Lender does not thereby waive a breach of any warranty or
representation made by Borrower hereunder or under any agreement, document, or
instrument delivered to Lender or otherwise referred to herein, and any claims
and rights of Lender resulting from any breach or misrepresentation by Borrower
are specifically reserved by Lender.
4.8 Conditions for Future Advances: The making of Advances under the
Revolving Credit in any form following the Closing Date is subject to the
following conditions precedent (all
15
instruments, documents and agreements to be in form and substance reasonably
satisfactory to Lender and its counsel) following the Closing Date:
a. This Agreement and each of the other Loan Documents shall be
effective;
b. No event or condition shall have occurred or become known to
Borrower, or would result from the making of any requested Advance, which could
reasonably be expected to have a Material Adverse Effect;
c. No Default or Event of Default then exists or after giving
effect to the making of the Advance would exist;
d. Each Advance is within and complies with the terms and
conditions of this Agreement including, without limitation, the notice
provisions contained in Section 2.4 hereof;
e. No Lien (other than a Permitted Lien) has been imposed on any of
the Collateral; and
f. Each representation and warranty set forth in Section 5 and any
other Loan Document in effect at such time (as amended or modified from time to
time) is then true and correct in all material respects as if made on and as of
such date except to the extent such representations and warranties are made only
as of a specific earlier date, in which event such representations and
warranties shall speak only as of such specific earlier date.
SECTION V. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the initial Advances
under the Revolving Credit and Loans to Borrower, Borrower warrants and
represents to Lender that:
5.1 Corporate Organization and Validity:
a. Borrower (i) is a corporation, organized and validly existing
under the laws of the state of Delaware, (ii) has the appropriate corporate
power and authority to operate its business and to own its Property, and (iii)
is qualified and in good standing and has lawful power and authority to engage
in the business it conducts in New York and in each state where the nature and
extent of its business requires qualification, except where the failure to so
qualify does not and could not reasonably be expected to have a Material Adverse
Effect. A list of all states and other jurisdictions where Borrower is qualified
to do business is shown on Schedule "5.1" attached hereto and made part hereof.
b. The making and performance of this Agreement and the other Loan
Documents will not violate any law, government rule or regulation, court or
administrative order or other such order, or the charter or bylaw provisions of
Borrower, or violate or result in a default (immediately or with the passage of
time) under any contract, agreement or instrument to which Borrower is a party,
or by which Borrower is bound, the violation of which could reasonably be
expected to have a Material Adverse Effect. Borrower is not in violation of any
term of any agreement or instrument to which it is a party or by which it may be
bound which violation had or could reasonably be expected to have a Material
Adverse Effect, or of its charter or bylaw provisions.
16
c. Borrower has all requisite corporate power and authority to
enter into and perform this Agreement and to incur the obligations herein
provided for, and has taken all proper and necessary corporate action to
authorize the execution, delivery and performance of this Agreement, and the
other Loan Documents as applicable.
d. This Agreement, the Note and all of the other Loan Documents,
when executed and delivered by Borrower, will be valid and binding upon
Borrower, and enforceable against Borrower in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
5.2 Places of Business: The only places of business of Borrower, and
the principal places where Borrower keeps and intends to keep its Property, are
at the addresses shown on Schedule "5.2" attached hereto and made part hereof.
5.3 Pending Litigation: There are no judgments or judicial or
administrative orders or proceedings pending, or to the knowledge of Borrower,
threatened, against Borrower in any court or before any Governmental Authority
except as shown on Schedule "5.3" attached hereto and made part hereof or
matters which are covered by insurance. To the knowledge of Borrower, there are
no investigations (civil or criminal) pending or threatened against Borrower in
any court or before any Governmental Authority. Borrower is not in default with
respect to any order of any Governmental Authority. To the knowledge of
Borrower, no executive officer of Borrower has been indicted in connection with
or convicted of engaging in any criminal conduct, or is currently subject to any
lawsuit or proceeding or under investigation in connection with any
anti-racketeering or other conduct or activity which may result in the
forfeiture of any property to any Governmental Authority.
5.4 Title to Properties: Borrower has good title in fee simple (or its
equivalent under applicable law) to all the Property it purports to own, as of
the date hereof free from Liens and free from the claims of any other Person,
except for Permitted Liens.
5.5 Governmental Consent: The execution and delivery of this Agreement,
the Note or any other Loan Documents does not require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority on the part of Borrower.
5.6 Taxes: All tax returns required to be filed by Borrower in any
jurisdiction have been filed, and all taxes, assessments, fees and other
governmental charges upon Borrower, or upon any of its Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those taxes being contested in good faith with due diligence by
appropriate proceedings for which appropriate reserves have been maintained
under GAAP. Borrower is not aware of any proposed additional tax assessment or
tax to be assessed against or applicable to Borrower.
5.7 Financial Statements: The annual audited consolidated balance sheet
of Borrower as of June 30, 2004, and the related statements of profit and loss,
stockholders' equity and cash flow as of such date accompanied by reports
thereon from Borrower's independent certified public accountants (complete
copies of which have been delivered to Lender), have been prepared in accordance
with GAAP and present fairly the financial position of Borrower as of such dates
and the results of its operations for such periods. The fiscal year for Borrower
currently ends on June
17
30, 2004. Borrower's federal tax identification number and state organizational
identification number for UCC purposes are as shown on Schedule "5.7" attached
hereto and made part hereof.
5.8 Full Disclosure: There is no fact known to Borrower which has not
been disclosed in writing to Lender which has had or could reasonably be
expected to have a Material Adverse Effect.
5.9 Subsidiaries: Borrower does not have any Subsidiaries or
Affiliates, except as shown on Schedule "5.9" attached hereto and made part
hereof.
5.10 Investments, Guarantees, Contracts, etc.:
a. Borrower does not own or hold equity or long term debt
investments in, or have any outstanding advances to, any other Person, except as
shown on Schedule "5.10(a)," attached hereto and made part hereof.
b. Borrower has not entered into any material leases for real or
personal Property (whether as landlord or tenant or lessor or lessee), except as
shown on Schedule "5.10(b)," attached hereto and made part hereof.
c. Except as otherwise specifically provided in this Agreement,
Borrower has not agreed or consented to cause or permit any of the Collateral,
whether now owned or hereafter acquired to be subject in the future (upon the
happening of a contingency or otherwise), to a Lien not permitted by this
Agreement.
5.11 Government Regulations, etc.:
a. The use of the proceeds of and Borrower's issuance of the Note
will not directly or indirectly violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations U, T and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
Borrower does not own or intend to carry or purchase any "margin stock" within
the meaning of said Regulation U.
b. Borrower has obtained all licenses, permits, franchises or other
governmental authorizations necessary for the ownership of its Property and for
the conduct of its business, the failure of which to obtain could reasonably be
expected to have a Material Adverse Effect.
c. As of the date hereof, no employee benefit plan ("Pension
Plan"), as defined in Section 3(2) of ERISA, maintained by Borrower or under
which Borrower could have any liability under ERISA (i) has failed to meet the
minimum funding standards established in Section 302 of ERISA (if applicable),
(ii) has failed to comply in a material respect with all applicable requirements
of ERISA and of the Internal Revenue Code, including all applicable rulings and
regulations thereunder, (iii) has engaged in or been involved in a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue
Code which would subject Borrower to any material liability, or (iv) has been
terminated if such termination would subject Borrower to any material liability.
Borrower has not assumed, or received notice of a claim asserted against
Borrower for, withdrawal liability (as defined in Section 4207 of ERISA) with
respect to any multi employer pension plan and is not a member of any Controlled
Group (as defined in ERISA). Borrower does
18
not participate in any multi employer pension plan. All Pension Plans are shown
on Schedule "5.11(c)" attached hereto and made part hereof.
d. Borrower is not in violation of or receipt of written notice
that it is in violation of any applicable statute, regulation or ordinance of
the United States of America, or of any state, city, town, municipality, county
or of any other jurisdiction, or of any agency, or department thereof,
(including, without limitation, Environmental Laws or government procurement
regulations), a violation of which could reasonably be expected to cause a
Material Adverse Effect.
e. Borrower is current with all reports and documents required to
be filed with any state or federal securities commission or similar agency and
is in compliance in all material respects with all applicable rules and
regulations of such commissions, the failure of which to be in compliance with
could reasonably be expected to have a Material Adverse Effect.
5.12 Business Interruptions: Within five (5) years prior to the date
hereof, none of the business, Property or operations of Borrower have been
materially and adversely affected in any way by any casualty, strike, lockout,
combination of workers, order of the United States of America, or any state or
local government, or any political subdivision or agency thereof, directed
against Borrower. There are no pending or, to Borrower's knowledge, threatened
labor disputes, strikes, lockouts or similar occurrences or grievances affecting
Borrower. No labor contract of Borrower is scheduled to expire prior to the
Revolving Credit Maturity Date.
5.13 Names and Intellectual Property:
a. Within five (5) years prior to the Closing Date, Borrower has
not conducted business under or used any other name (whether corporate or
assumed) except for the names shown on Schedule "5.13(a)" attached hereto and
made part hereof. Borrower, or one of its Subsidiaries', is the sole owner of
all names listed on such Schedule "5.13(a)" and any and all business done and
all invoices issued in such trade names are Borrower's, or one of its
Subsidiaries', sales, business and invoices. Each trade name of Borrower
represents a division or trading style of Borrower and not a separate Subsidiary
or Affiliate or independent entity.
b. Borrower owns or has adequate rights to use all trademarks,
service marks, patents or copyrights which are material to Borrower's business.
To Borrower's knowledge, Borrower is not in violation of any rights of any other
Person with respect to such Property.
5.14 Other Associations: Borrower is not engaged and has no interest in
any joint venture or partnership with any other Person except as shown on
Schedule "5.14," attached hereto and made part hereof.
5.15 Environmental Matters: Except as shown on Schedule "5.15,"
attached hereto and made part hereof:
a. To the best of Borrower's knowledge after due inquiry, no
Property presently owned, leased or operated by Borrower contains, or has
previously contained, any Hazardous Substances in amounts or concentrations
which (i) constitute or constituted a violation of, or (ii) could reasonably be
expected to give rise to liability under, any Environmental Law.
b. To the best of Borrower's knowledge after due inquiry, (i)
Borrower is in compliance in all material respects, and, for the duration of all
applicable statutes of limitations
19
periods, has been in compliance in all material respects with all applicable
Environmental Laws, and (ii) there is no contamination at, under or about any
properties presently owned, leased, or operated by Borrower or violation of any
Environmental Law with respect to such properties which could reasonably be
expected to materially interfere with any of their continued operations or
reasonably be expected to materially impair the fair saleable value thereof.
c. Borrower has not received any notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws and Borrower has no
knowledge that any such notice will be received or is being threatened.
d. Hazardous Substances have not been transported or disposed of in
a manner or to a location which are reasonably likely to give rise to liability
of Borrower under any Environmental Law.
e. No judicial proceeding or governmental or administrative action
is pending, or to the knowledge of Borrower, threatened under any Environmental
Law to which Borrower is, or to Borrower's knowledge will be, named as a party,
nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding, the implementation of which is reasonably likely to
have a Material Adverse Effect on Borrower's business, financial condition or
Property under any Environmental Law.
5.16 Regulation O: No director, executive officer or principal
shareholder of Borrower is a director, executive officer or principal
shareholder of Lender. For the purposes hereof the terms "director" "executive
officer" and "principal shareholder" (when used with reference to Lender), have
the respective meanings assigned thereto in Regulation O issued by the Board of
Governors of the Federal Reserve System.
5.17 Capital Stock: The authorized and outstanding Capital Stock of
Borrower is as shown on Schedule "5.17" attached hereto and made part hereof.
All of the Capital Stock of Borrower has been duly and validly authorized and
issued and is fully paid and non-assessable and has been sold and delivered to
the holders thereof in compliance with, or under valid exemption from, all
Federal and state laws and the rules and regulations of all Governmental
Authorities governing the sale and delivery of securities. Except for the rights
and obligations shown on Schedule "5.17," there are no subscriptions, warrants,
options, calls, commitments, rights or agreements by which Borrower or any of
the shareholders of Borrower is bound relating to the issuance, transfer, voting
or redemption of shares of its Capital Stock or any pre-emptive rights held by
any Person with respect to the shares of Capital Stock of Borrower. Except as
shown on Schedule "5.17," Borrower has not issued any securities convertible
into or exchangeable for shares of its Capital Stock or any options, warrants or
other rights to acquire such shares or securities convertible into or
exchangeable for such shares.
5.18 Solvency: After giving effect to the transactions contemplated
under this Agreement, Borrower is solvent, is able to pay its debts as they
become due, and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns Property having a value
both at fair valuation and at present fair salable value greater than the amount
required to pay Borrower's debts. Borrower will not be rendered insolvent by the
execution and delivery of this Agreement or any of the other Loan Documents
executed in connection with this Agreement or by the transactions contemplated
hereunder or thereunder.
20
5.19 Perfection and Priority: This Agreement and the other Loan
Documents are effective to create in favor of Lender legal, valid and
enforceable Liens in all right, title and interest of Borrower in the
Collateral, and when financing statements have been filed in the offices of the
jurisdictions shown on Schedule "5.19," attached hereto and made part hereof
under Borrower's name, Borrower will have granted to Lender, and Lender will
have perfected first priority Liens in the Collateral.
5.20 Intentionally Deleted Prior to Execution
5.21 Intentionally Deleted Prior to Execution
5.22 Deposit Accounts: All Deposit Accounts of Borrower as of the date
hereof are shown on Schedule "5.22," attached hereto and made part hereof.
SECTION VI. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants that, until all of the Obligations are paid and
satisfied in full and the Revolving Credit has been terminated:
6.1 Payment of Taxes and Claims: Borrower shall pay, before they become
delinquent, all taxes, assessments and governmental charges, or levies imposed
upon it, or upon Borrower's Property, and all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other Persons, entitled to the
benefit of statutory or common law Liens which, in any case, if unpaid, would
result in the imposition of a Lien upon its Property; provided however, that
Borrower shall not be required to pay any such tax, assessment, charge, levy,
claim or demand if the amount, applicability or validity thereof, shall at the
time, be contested in good faith and by appropriate proceedings by Borrower, and
if Borrower shall have set aside on its books adequate reserves in respect
thereof, if so required in accordance with GAAP; which deferment of payment is
permissible so long as no Lien other than a Permitted Lien has been entered and
Borrower's title to, and its right to use, its Property are not materially
adversely affected thereby.
6.2 Maintenance of Properties and Corporate Existence:
a. Property - Borrower shall maintain its Property in good
condition (normal wear and tear excepted) make all necessary renewals,
replacements, additions, betterments and improvements thereto and will pay and
discharge when due the cost of repairs and maintenance to its Property, and will
pay all rentals when due for all real estate leased by Borrower.
b. Property Insurance, Public and Products Liability Insurance -
Borrower shall maintain insurance (i) on all insurable tangible Property
(including, without limitation, the Collateral) against fire, flood, casualty
and such other hazards (including, without limitation, extended coverage,
workmen's compensation, boiler and machinery, with inflation coverage by
endorsement), and (ii) against public liability, product liability and business
interruption, in each case in such amounts, with such deductibles and with such
insurers as are customarily used by companies operating in the same industry as
Borrower. At or prior to Closing, Borrower shall furnish Lender with duplicate
original policies of insurance or such other evidence of insurance as Lender may
require, and any certificates of insurance shall be issued on Xxxxx Form-27. In
the event Borrower fails to procure or cause to be procured any such insurance
or to timely pay or cause to be paid the premium(s) on any such insurance,
Lender may do so for Borrower, but Borrower shall continue to be liable for the
same. The policies of all casualty insurance covering the Collateral shall
contain standard Lender's Loss
21
Payable Clauses (and, with respect to liability and interruption insurance,
additional insured clauses) issued in favor of Lender under which all losses
thereunder shall be paid to Lender as Lender's interest may appear. Such
policies shall expressly provide that the requisite insurance cannot be altered
or canceled without thirty (30) days prior written notice to Lender and shall
insure Lender notwithstanding the act or neglect of Borrower. Borrower hereby
appoints Lender as Borrower's attorney-in-fact, exercisable at Lender's option
to endorse any check which may be payable to Borrower in order to collect the
proceeds of such insurance. Unless an Event of Default shall have occurred and
be continuing, and any amount or amounts collected by Lender pursuant to the
provisions of this Section shall be applied to repair or replace the Collateral
damaged or destroyed by any casualty. If an Event of Default shall have occurred
and be continuing, or if Borrower notified Lender that the repair or replacement
of any damaged or destroyed Collateral is not necessary to its business, amounts
so collected by Lender may be applied by Lender, in its sole discretion, to any
Obligations. Borrower further covenants that all insurance premiums owing under
its current policies have been paid. Borrower shall notify Lender, immediately,
upon Borrower's receipt of a notice of termination, cancellation, or non-renewal
from its insurance company of any such policy.
c. Financial Records - Borrower shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
Borrower shall not change its fiscal year end date without the prior written
consent of Lender.
d. Corporate Existence and Rights - Borrower shall do (or cause to
be done) all things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises.
e. Compliance with Laws - Borrower shall be in compliance with any
and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local (including, without limitation, Environmental Laws and government
procurement regulations), and shall obtain any and all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its Property or to the conduct of its businesses, the violation of which, or the
failure of which to obtain, could reasonably be expected to cause a Material
Adverse Effect. Borrower shall timely satisfy all assessments, fines, costs and
penalties imposed (after exhaustion of all appeals, provided a stay has been put
in effect during such appeal) by any Governmental Authority against Borrower or
any Property of Borrower.
6.3 Business Conducted: Borrower shall continue in the business
presently operated by it using commercially reasonable efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or indirectly, in
any material respect in any line of business substantially different from the
businesses conducted by Borrower immediately prior to the Closing Date.
6.4 Litigation: Borrower shall give prompt notice to Lender of any
litigation claiming in excess of $250,000.00 from Borrower, or which may
otherwise have a Material Adverse Effect.
6.5 Issue Taxes: Borrower shall pay all taxes (other than taxes based
upon or measured by any Lender's income or revenues or any personal property
tax), if any, in connection with the issuance of the Note and the recording of
any Lien documents. The obligations of Borrower hereunder shall survive the
payment of Borrower's Obligations hereunder and the termination of this
Agreement.
22
6.6 Bank Accounts: Borrower shall maintain its major operating
account(s) with Lender.
6.7 Employee Benefit Plans: Borrower shall (a) if applicable, fund all
of its Pension Plan(s) in a manner that will satisfy the minimum funding
standards of Section 302 of ERISA, (b) furnish Lender, promptly upon Lender's
request, with copies of all reports or other statements filed with the United
States Department of Labor, the PBGC or the IRS with respect to all Pension
Plan(s), or which Borrower, may receive from the United States Department of
Labor, the IRS or the PBGC, with respect to all such Pension Plan(s), and (c)
promptly advise Lender of the occurrence of any reportable event (as defined in
Section 4043 of ERISA, other than a reportable event for which the thirty (30)
day notice requirement has been waived by the PBGC) or prohibited transaction
(under Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with
respect to any such Pension Plan(s) and the action which Borrower proposes to
take with respect thereto.
6.8 Financial Covenants: Borrower shall maintain and comply with the
following financial covenants:
a. Tangible Net Worth - Borrower shall maintain at all times
Tangible Net Worth of not less than $47,000,000, to be tested quarterly based
upon the financial statements required to be submitted hereunder.
b. Leverage Ratio - Borrower shall maintain a Leverage Ratio of not
more than .5 to 1.0, measured as of each fiscal quarter end.
6.9 Financial and Business Information: Borrower shall deliver or cause
to be delivered to Lender the following:
a. Financial Statements and Collateral Reports: within ninety (90)
days after the end of each fiscal year, a 10K Report of the Borrower and its
Consolidated Subsidiaries as of the end of such year, fairly presenting
Borrower's and its Consolidated Subsidiaries' financial position, which
statements will consist of a balance sheet and related statements of income,
retained earnings, and cash flow covering the period of the Borrower's
immediately preceding fiscal year, and which will be prepared by Borrower and
audited by independent certified public accountants satisfactory to the Lender.
At the same time, the Borrower will deliver to the Lender a covenant compliance
certificate, in form and substance satisfactory to the Lender. In addition, the
Borrower will deliver to the Lender, within sixty (60) days after the first,
second and third fiscal quarter of each fiscal year, a 10Q Report of Borrower
and its Consolidated Subsidiaries. All such financial statements shall be
accompanied by a certification by the chief financial officer of the Borrower
that the statements have been prepared in accordance with GAAP.
b. Notice of Event of Default - promptly upon becoming aware of the
existence of any condition or event which constitutes a Default or an Event of
Default under this Agreement, a written notice specifying the nature and period
of existence thereof and what action Borrower is taking (and proposes to take)
with respect thereto; and
c. Notice of Claimed Default - promptly upon receipt by Borrower,
notice of default, oral or written, given to Borrower by any creditor for
Indebtedness for borrowed money or other long-term Indebtedness of Borrower in
excess of $250,000.00.
d. Securities and Other Reports - if Borrower shall be required to
file reports
23
with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended, promptly upon its becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by Borrower to stockholders generally, and, a copy of each
regular or periodic report, and any registration statement, or prospectus in
respect thereof, filed by Borrower with any securities exchange or with federal
or state securities and exchange commissions or any successor agency.
6.10 Audits and Inspection: Borrower shall permit any of Lender's
officers or other representatives to visit and inspect upon reasonable notice
during business hours any of the locations of Borrower, to examine and audit all
of Borrower's books of account, records, reports and other papers, to make
copies and extracts therefrom and to discuss its affairs, finances and accounts
with its executive officers and independent certified public accountants
Lender's reasonable out-of-pocket expenses (all of which amounts shall be
Expenses); provided that, Lender shall not, unless an Event of Default occurs
and is continuing, conduct more than one (1) audit per year. Borrower shall be
responsible for Lender's reasonable out-of-pocket expenses in connection with
any such audit (which out-of-pocket expenses shall constitute Expenses).
6.11 Intentionally Deleted Prior to Execution
6.12 Intentionally Deleted Prior to Execution
6.13 Information to Participant: Lender may divulge to any participant,
assignee or co-lender or prospective participant, assignee or co-lender it may
obtain in the Revolving Credit or any portion thereof, all information, and
furnish to such Person copies of any reports, financial statements,
certificates, and documents obtained under any provision of this Agreement, or
related agreements and documents, provided that Lender notifies Borrower prior
to such disclosure and, if requested by Borrower, such Person executes a
confidentiality agreement acceptable to Borrower.
6.14 Material Adverse Developments: Borrower agrees that immediately
upon becoming aware of any development or other information outside the ordinary
course of business and excluding matters of a general economic, financial or
political nature which would reasonably be expected to have a Material Adverse
Effect it shall give to Lender telephonic notice specifying the nature of such
development or information and such anticipated effect. In addition, such verbal
communication shall be confirmed by written notice thereof to Lender on the same
day such verbal communication is made or the next Business Day thereafter.
6.15 Places of Business: Borrower shall give thirty (30) days prior
written notice to Lender of any changes in the location of any of its respective
places of business, of the places where records concerning its Accounts or where
its Inventory are kept, or the establishment of any new, or the discontinuance
of any existing place of business.
6.16 Intentionally Deleted Prior To Execution
6.17 Intentionally Deleted Prior To Execution
6.18 Out of Debt. Borrower agrees that there shall be at least one
period of thirty (30) consecutive days during the period commencing on the
Closing Date and ending on the Revolving Credit Maturity Date during which
aggregate Advances under the Revolving Credit shall be zero.
6.19 Additional Guaranties. Upon formation or creation, each new
Domestic Subsidiary
24
shall enter into a Surety Agreement and a Security Agreement in the forms
entered into by Surety granting a first perfected security interest in favor of
Lender in all of such Domestic Subsidiary's Accounts and Inventory and the
Proceeds thereof.
6.20 Intentionally Deleted Prior to Execution
SECTION VII. BORROWER'S NEGATIVE COVENANTS:
Borrower covenants, that until all of the Obligations are paid and
satisfied in full and the Revolving Credit has been terminated, without Lender's
prior consent:
7.1 Merger, Consolidation, Dissolution or Liquidation:
a. Borrower shall not engage in any Asset Sale after giving effect
to which Borrower would be in violation of Section 6.8 hereof.
b. Borrower shall not (i) merge or consolidate with any other
Person unless after giving effect to such merger or consolidation the
stockholders or Borrower prior to such merger or consolidation own a majority of
the outstanding capital stock of the surviving entity and Borrower is not
otherwise in violation of any covenant or condition contained in this Agreement,
or (ii) engage in a dissolution or liquidation.
7.2 Acquisitions: Borrower shall not acquire all or a material portion
of the Capital Stock or assets of any Person in any transaction or in any series
of related transactions or enter into any sale and leaseback transaction, unless
after giving effect to such transaction or transactions Borrower is still in
compliance with all of the covenants and conditions contained in this Agreement.
7.3 Liens and Encumbrances: Borrower shall not cause or permit or agree
or consent to cause or permit in the future (upon the happening of a contingency
or otherwise), the Collateral whether now owned or hereafter acquired, to be
subject to a Lien or be subject to any claim, except for Permitted Liens.
7.4 Transactions With Affiliates or Subsidiaries:
a. Borrower shall not enter into any transaction with any
Subsidiary or other Affiliate, including, without limitation, the purchase,
sale, or exchange of Property, or the loaning or giving of funds to any
Affiliate or any Subsidiary unless: (i) such Subsidiary or Affiliate is engaged
in a business substantially related to the business conducted by Borrower and
the transaction is pursuant to the reasonable requirements of Borrower's
business and (A) consistent with past practice between Borrower and such
Subsidiary or Affiliate, or (B) upon terms substantially the same and no less
favorable to Borrower as it would obtain in a comparable arm's length
transactions with any Person not an Affiliate or a Subsidiary, and so long as
such transaction is not prohibited hereunder; or (ii) such transaction is
intended for administrative purposes.
b. Borrower shall not create or acquire any Consolidated Subsidiary
unless upon creation or acquisition Borrower remains in compliance with the
covenants and conditions contained in this Agreement and, if such Consolidated
Subsidiary is a Domestic Subsidiary, such Domestic Subsidiary shall enter into a
Surety Agreement and a Security Agreement in the forms entered into by Surety
wherein such Domestic Subsidiary grants to Lender a security interest in all of
such Domestic Subsidiary's Accounts and Inventory and the Proceeds thereof.
25
7.5 Guarantees: Excepting the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection, Borrower shall not
become or be liable, directly or indirectly, primary or secondary, matured or
contingent, in any manner, whether as guarantor, surety, accommodation maker, or
otherwise, for the existing or future Indebtedness of any kind of any Person
other than its Consolidated Subsidiaries.
7.6 Intentionally Deleted Prior to Execution
7.7 Intentionally Deleted Prior to Execution
7.8 Use of Lenders' Name: Borrower shall not use Lender's name in
connection with any of its business operations. Nothing herein contained is
intended to permit or authorize Borrower to make any contract on behalf of
Lender.
7.9 Miscellaneous Covenants:
a. Borrower shall not become or be a party to any contract or
agreement which at the time of becoming a party to such contract or agreement
materially impairs Borrower's ability to perform under this Agreement, or which
results in a breach or violation under any other instrument, agreement or
document to which Borrower is a party or by which it is or may be bound, the
breach or violation of which can reasonably be expected to have a Material
Adverse Effect.
b. Borrower shall not carry or purchase any "margin stock" within
the meaning of Regulations U, T or X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II.
7.10 Jurisdiction of Organization: If a Registered Organization,
Borrower shall not change its jurisdiction of organization.
SECTION VIII. DEFAULT
8.1 DEFAULT
8.2 Events of Default: Each of the following events shall constitute an
event of default ("Event of Default"):
a. Payments - if Borrower fails to make any payment of principal or
interest, including any Overadvance, under the Obligations within five (5)
Business Days after the date such payment is due and payable; or
b. Other Charges - if Borrower fails to pay any other charges,
fees, Expenses or other monetary obligations owing to Lender arising out of or
incurred in connection with this Agreement within five (5) Business Days after
the date such payment is due and payable; or
c. Particular Covenant Defaults - if Borrower fails to perform,
comply with or observe any covenant or undertaking contained in this Agreement
and (other than with respect to the covenants contained in Section 6.8 and
Sections 7.1, 7.2 and 7.8 for which no cure period shall exist), such failure
continues for fifteen (15) days after the occurrence thereof; or
26
d. Financial Information - if any statement, report, financial
statement, or certificate made or delivered by Borrower or any of its officers,
employees or agents, to Lender is not true and correct, in all material
respects, when made; or
e. Uninsured Loss - if there shall occur any uninsured damage to or
loss, theft, or destruction in excess of Two Hundred and Fifty Thousand Dollars
($250,000.00) in the aggregate with respect to any portion of any Property of
Borrower; or
f. Warranties or Representations - if any warranty, representation
or other statement by or on behalf of Borrower contained in this Agreement, any
of the other Loan Documents or in any other document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement, is
false or misleading in any material respect when made; or
g. Agreements with Others - (i) if Borrower shall default beyond
any grace period in the payment of principal or interest of any Indebtedness of
Borrower in excess of Two Hundred and Fifty Thousand Dollars ($250,000.00) in
the aggregate; or (ii) if Borrower otherwise defaults under the terms of any
such Indebtedness if the effect of such default is to enable the holder of such
Indebtedness to accelerate the payment of Borrower's obligations, which are the
subject thereof, prior to the maturity date or prior to the regularly scheduled
date of payment;
h. Other Agreements with Lender - if Borrower breaches or violates
in any material respect the terms of, or if a default (and expiration of any
applicable cure period), or an Event of Default occurs under any other existing
or future material agreement (related or unrelated) (including, without
limitation, the other Loan Documents) between Borrower and Lender; or
i. Judgments - if any final judgment for the payment of money in
excess of Two Hundred and Fifty Thousand Dollars ($250,000.00) in the aggregate
(i) which is not covered by insurance, or (ii) for which Borrower has not
established a cash or cash equivalent reserve in the full amount of such
judgment, shall be rendered by a court of record against Borrower and such
judgment shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or bonded pending
appeal; or
j. Assignment for Benefit of Creditors, etc. - if Borrower makes or
proposes in writing, an assignment for the benefit of creditors generally,
offers a composition or extension to creditors, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter owned or conducted
by Borrower; or
k. Bankruptcy, Dissolution, etc. - upon the commencement of any
action for the dissolution or liquidation of Borrower, or the commencement of
any proceeding to avoid any transaction entered into by Borrower, or the
commencement of any case or proceeding for reorganization or liquidation of
Borrower's debts under the Bankruptcy Code or any other state or federal law,
now or hereafter enacted for the relief of debtors, whether instituted by or
against Borrower; provided however, that Borrower shall have thirty (30) days to
obtain the dismissal or discharge of involuntary proceedings filed against it,
it being understood that during such thirty (30) day period, Lender shall not be
obligated to make Advances hereunder and Lender may seek adequate protection in
any bankruptcy proceeding; or
l. Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for any Borrower or for
Borrower's Property having a value in excess
27
of Two Hundred and Fifty Thousand Dollars ($250,000.00) in the aggregate; or
m. Execution Process, etc. - the issuance of any execution or
distraint process against any Property of Borrower having a value in excess of
Two Hundred and Fifty Thousand Dollars ($250,000.00) in the aggregate; or
n. Termination of Business - if Borrower ceases any material
portion of its business operations as presently conducted; or
o. Pension Benefits, etc. - if Borrower fails to comply with ERISA
so that proceedings are commenced to appoint a trustee under ERISA to administer
Borrower's employee plans or the PBGC institutes proceedings to appoint a
trustee to administer such plan(s), or a Lien is entered to secure any
deficiency or claim or a "reportable event" as defined under ERISA occurs; or
p. Intentionally Deleted Prior to Execution
q. Change of Control - if there shall occur a Change of Control; or
r. Surety Agreement - if any breach or default occurs under the
Surety Agreement, if any Surety dies, or if the Surety Agreement, or any
obligation to perform thereunder is terminated; or
s. Liens - if any Lien in favor of Lender shall cease to be valid,
enforceable and perfected and prior to all other Liens other than Permitted
Liens or if Borrower or any Governmental Authority shall assert any of the
foregoing; or
t. Intentionally Deleted Prior to Execution
u. Other Loan Documents - if any Affiliate of Borrower who is a
party to a Loan Document breaches or violates any material term, provision or
condition of such Loan Document.
8.3 Cure: Nothing contained in this Agreement or the Loan Documents
shall be deemed to compel Lender to accept a cure of any Event of Default
hereunder.
8.4 Rights and Remedies on Default:
a. In addition to all other rights, options and remedies granted or
available to Lender under this Agreement or the Loan Documents (each of which is
also then exercisable by Lender), or otherwise available at law or in equity,
upon or at any time after the occurrence and during the continuance of a Default
or an Event of Default, Lender may, in its discretion, withhold or cease making
Advances under the Revolving Credit.
b. In addition to all other rights, options and remedies granted or
available to Lender under this Agreement or the Loan Documents (each of which is
also then exercisable by Lender), or otherwise available at law or in equity,
upon or at any time after the occurrence and during the continuance of an Event
of Default Lender may, in its discretion, terminate the Revolving Credit and
declare the Obligations immediately due and payable, all without demand, notice,
presentment or protest or further action of any kind (it also being understood
that the occurrence of any of the events or conditions set forth in Sections 8.1
(i), (j) or (k) shall
28
automatically cause an acceleration of the Obligations).
c. In addition to all other rights, options and remedies granted or
available to Lender, under this Agreement or the Loan Documents (each of which
is also then exercisable by Lender), upon or at any time after the occurrence
and during the continuance of an Event of Default, Borrower shall be obligated
to deliver and pledge to Lender, cash collateral in the amount of all
outstanding Letters of Credit.
d. In addition to all other rights, options and remedies granted or
available to Lender under this Agreement or the Loan Documents (each of which is
also then exercisable by Lender), or otherwise available at law or in equity,
upon or at any time after the acceleration of the Obligations following the
occurrence of an Event of Default (other than the rights with respect to clause
(iv) below which Lender may exercise at any time after an Event of Default and
regardless of whether there is an acceleration), Lender may, in its discretion,
exercise all rights under the UCC and any other applicable law or in equity, and
under all Loan Documents permitted to be exercised after the occurrence of an
Event of Default, including the following rights and remedies (which list is
given by way of example and is not intended to be an exhaustive list of all such
rights and remedies):
i. The right to take possession of, send notices regarding and
collect directly the Collateral, with or without judicial process (including
without limitation the right to notify the United States postal authorities to
redirect mail addressed to Borrower to an address designated by Lender); or
ii. By its own means or with judicial assistance, enter
Borrower's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on such premises in compliance with
subsection (e) below, without any liability for rent, storage, utilities or
other sums, and Borrower shall not resist or interfere with such action; or
iii. Require Borrower at Borrower's expense to assemble all or
any part of the Collateral (other than real estate or fixtures) and make it
available to Lender at any place designated by Lender; or
iv. The right to modify the terms and conditions upon which
Lender may be willing to consider making Advances under the Revolving Credit or
to take reserves against the Revolving Credit; or
v. The right to enjoin any violation of Section 7.1, it being
agreed that Lender's remedies at law are inadequate.
e. Borrower hereby agrees that a notice received by it at least ten
(10) Business Days before the time of any intended public sale or of the time
after which any private sale or other disposition of the Collateral is to be
made, shall be deemed to be reasonable notice of such sale or other disposition.
If permitted by applicable law, any perishable inventory or Collateral which
threatens to speedily decline in value or which is sold on a recognized market
may be sold immediately by Lender without prior notice to Borrower. Borrower
covenants and agrees not to interfere with or impose any obstacle to Lender's
exercise of its rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder. Lender shall have no obligation to
clean up or prepare the Collateral for sale. If Lender sells any of the
Collateral upon credit, Borrower will only be credited with payments actually
made by the purchaser thereof, that are received by Lender. Lender may, in
connection with any sale of the Collateral specifically disclaim
29
any warranties of title or the like.
8.5 Nature of Remedies: All rights and remedies granted Lender
hereunder and under the Loan Documents, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Lender may proceed with any number of remedies at the same time until all
Obligations are satisfied in full. The exercise of any one right or remedy shall
not be deemed a waiver or release of any other right or remedy, and Lender, upon
or at any time after the occurrence of an Event of Default, may proceed against
Borrower, at any time, under any agreement, with any available remedy and in any
order.
8.6 Set-Off: If any bank account of Borrower with Lender or any
participant is attached or otherwise liened or levied upon by any third party,
Lender (and such participant) shall have and be deemed to have, without notice
to Borrower, the immediate right of set-off and may apply the funds or amount
thus set-off against any of Borrower's Obligations hereunder.
SECTION IX. MISCELLANEOUS
9.1 Governing Law: THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE WHERE LENDER'S OFFICE IDENTIFIED IN SECTION 9.8 IS LOCATED.
THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED
TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF
ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
9.2 Integrated Agreement: The Note, the other Loan Documents, all
related agreements, and this Agreement shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender's
rights and remedies. If, after applying the foregoing, an inconsistency still
exists, the provisions of this Agreement shall constitute an amendment thereto
and shall control.
9.3 Waiver: No omission or delay by Lender in exercising any right or power
under this Agreement or any related agreements and documents will impair such
right or power or be construed to be a waiver of any Default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Borrower no waiver will be valid unless
in writing and signed by Lender and then only to the extent specified.
9.4 Indemnity:
a. Borrower releases and shall indemnify, defend and hold harmless
Lender and its respective officers, employees and agents, of and from any
claims, demands, liabilities, obligations, judgments, injuries, losses, damages
and costs and expenses (including, without limitation, reasonable legal fees)
resulting from (i) acts or conduct of Borrower under, pursuant or related to
this Agreement and the other Loan Documents, (ii) Borrower's breach or violation
of any representation, warranty, covenant or undertaking contained in this
Agreement or the other Loan Documents, (iii) Borrower's failure to comply with
any or all laws, statutes, ordinances,
30
governmental rules, regulations or standards, whether federal, state or local,
or court or administrative orders or decrees, (including without limitation
Environmental Laws, etc.), and (iv) any claim by any other creditor of Borrower
against Lender arising out of any transaction whether hereunder or in any way
related to the Loan Documents and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting solely from acts or conduct of
Lender constituting willful misconduct or gross negligence.
b. Promptly after receipt by an indemnified party under subsection
(a) above of notice of the commencement of any action by a third party, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof. The omission so to notify the indemnifying
party shall relieve the indemnifying party from any liability which it may have
to any indemnified party under such subsection only if the indemnifying party is
materially prejudiced to defend such actions as a result of such failure to so
notify. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnified party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation.
9.5 Time: Whenever Borrower shall be required to make any payment, or
perform any act, on a day which is not a Business Day, such payment may be made,
or such act may be performed, on the next succeeding Business Day. Time is of
the essence in Borrower's performance under all provisions of this Agreement and
all related agreements and documents.
9.6 Expenses of Lender: At Closing and from time to time thereafter,
Borrower will pay upon demand of Lender all reasonable costs, fees and expenses
of Lender in connection with (i) the analysis, negotiation, preparation,
execution, administration, delivery and termination of this Agreement, any other
Loan Documents and the documents and instruments referred to herein and therein,
and any amendment, amendment and restatement, supplement, waiver or consent
relating hereto or thereto, whether or not any such amendment, amendment and
restatement, supplement, waiver or consent is executed or becomes effective,
search costs and the reasonable fees, expenses and disbursements of counsel for
Lender, (ii) the enforcement of Lender's rights hereunder, or the collection of
any payments owing from Borrower under this Agreement and/or the other Loan
Documents or the protection, preservation or defense of the rights of Lender
hereunder and under the other Loan Documents, and (iii) any refinancing or
restructuring of the credit arrangements provided under this Agreement and other
Loan Documents in the nature of a "work-out" or of any insolvency or bankruptcy
proceedings, or otherwise, including the reasonable fees and disbursements of
counsel for Lender (collectively, the "Expenses");
9.7 Brokerage: This transaction was brought about and entered into by
Lender and Borrower acting as principals and without any brokers, agents or
finders being the effective procuring cause hereof. Borrower represents that it
has not committed Lender to the payment of any brokerage fee, commission or
charge in connection with this transaction. If any such claim is made on Lender
by any broker, finder or agent or other person as a result of any act by or on
behalf
31
of Borrower, Borrower hereby indemnifies, defends and saves such party harmless
against such claim and further will defend, with counsel reasonably satisfactory
to Lender, any action or actions to recover on such claim, at Borrower's own
cost and expense. Borrower further agrees that, until any such claim or demand
is adjudicated in Borrower's favor, the amount demanded shall be deemed an
Obligation of Borrower under this Agreement.
9.8 Notices:
a. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed given if delivered in person to the
person listed below or if sent by certified mail, return receipt requested, or
by nationally recognized overnight courier, as follows, unless such address is
changed by written notice hereunder:
If to Lender to: Commerce Bank, X.X.
Xxxxxxxx Plaza Office Park
000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx
Attention: Xx. Xxxxx Xxxxxxx, Regional Vice President
If to Borrower to: American Technical Ceramics Corp.
00 Xxxxxx Xxxxx
Xxxxxxxxxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxx, Vice President, Controller
b. Any notice sent by Lender, or Borrower by any of the above
methods shall be deemed to be given when so received.
c. In addition to the foregoing, requests for Advances may be sent
by telecopy or facsimile transmission to Lender pursuant to Section 2.4(b)(ii)
(Facsimile No. (000) 000-0000; Attention: Xxxxx Xxxxxxx).
d. Lender shall be fully entitled to rely upon any telecopy
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
9.9 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
9.10 Survival: All warranties, representations, and covenants made by
Borrower herein, or in any agreement referred to herein or on any certificate,
document or other instrument delivered by it or on its behalf under this
Agreement, shall be considered to have been relied upon by Lender, and shall
survive the delivery to Lender of the Note, regardless of any investigation made
by Lender or on its behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of Lender shall constitute
warranties and representations by Borrower hereunder. Except as otherwise
expressly provided herein, all covenants made by Borrower hereunder or under any
other agreement or instrument shall be deemed continuing until all
32
Obligations are satisfied in full. All indemnification obligations under this
Agreement, including under Sections 9.4 and 9.7, shall survive the termination
of this Agreement and payment of the Obligations for a period of one (1) year.
9.11 Successors and Assigns: This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
Borrower may not transfer, assign or delegate any of its duties or obligations
hereunder. Borrower acknowledges and agrees that Lender may at any time, and
from time to time, (a) sell participating interests in the Loans, and Lender's
rights hereunder, to other financial institutions, and (b) sell, transfer, or
assign the Loans and Lender's rights hereunder and the other Loan Documents, to
any one or more additional banks or financial institutions, subject (as to
Lender's rights under this clause (b)) to Borrower's written consent, which
consent shall not be unreasonably withheld; provided that, no consent under this
clause (b) shall be required if an Event of Default exists at the time of such
sale, transfer or assignment.
9.12 Duplicate Originals: Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
9.13 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Borrower
and Lender.
9.14 Signatories: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on behalf of his
principal and that he executes the Agreement in such capacity and not as a
party.
9.15 Third Parties: No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including, without limitation, Borrower's duties under any account
or contract with any other Person.
9.16 Discharge of Taxes, Borrower's Obligations, Etc.: Lender, in its
sole discretion, shall have the right at any time, and from time to time, with
at least ten (10) days prior notice to Borrower if Borrower fail to do so, to:
(a) pay for the performance of any of Borrower's obligations hereunder, and (b)
discharge taxes or Liens, at any time levied or placed on Borrower's Property in
violation of this Agreement unless Borrower is in good faith with due diligence
by appropriate proceedings contesting such taxes or Liens and maintaining proper
reserves therefor in accordance with GAAP. Expenses and advances shall be added
to the Revolving Credit, and bear interest at the rate applicable to the
Revolving Credit, until reimbursed to Lender. Such payments and advances made by
Lender shall not be construed as a waiver by Lender of a Default or Event of
Default under this Agreement.
9.17 Withholding and Other Tax Liabilities: Lender shall have the right
to refuse to make any Advances from time to time unless Borrower shall, at
Lender's request, have given to Lender evidence, reasonably satisfactory to
Lender, that Borrower has properly deposited or paid, as required by law, all
withholding taxes and all federal, state, city, county or other taxes due up to
and including the date of the requested Advance. Copies of deposit slips showing
payment shall constitute satisfactory evidence for such purpose. In the event
that any Lien, assessment or tax liability against Borrower shall arise in favor
of any taxing authority, whether or not notice thereof
33
shall be filed or recorded as may be required by law, Lender shall have the
right (but shall not be obligated, nor shall Lender hereby assume the duty) to
pay any such Lien, assessment or tax liability by virtue of which such charge
shall have arisen; provided, however, that Lender shall not pay any such tax,
assessment or Lien if the amount, applicability or validity thereof is being
contested in good faith and by appropriate proceedings by Borrower. In order to
pay any such Lien, assessment or tax liability, Lender shall not be obliged to
wait until such Lien, assessment or tax liability is filed before taking such
action as hereinabove set forth. Any sum or sums which Lender shall have paid
for the discharge of any such Lien shall be added to the Revolving Credit and
shall be paid by Borrower to Lender with interest thereon at the rate applicable
to the Revolving Credit, upon demand, and Lender shall be subrogated to all
rights of such taxing authority against Borrower.
9.18 Consent to Jurisdiction: Borrower and Lender each hereby
irrevocably consent to the non-exclusive jurisdiction of the Courts of the state
where Lender's office identified in Section 9.8 is located or the United States
District Court for New York in any and all actions and proceedings whether
arising hereunder or under any other agreement or undertaking. Borrower waives
any objection which Borrower may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens. Borrower irrevocably agrees to service
of process by certified mail, return receipt requested to the address of the
appropriate party set forth herein.
9.19 Additional Documentation: Borrower shall execute and/or
re-execute, and cause any Surety or other Person party to any Loan Document, to
execute and/or re-execute and to deliver to Lender or Lender's counsel, as may
be deemed appropriate, any document or instrument signed in connection with this
Agreement which was incorrectly drafted and/or signed, as well as any document
or instrument which should have been signed at or prior to the Closing, but
which was not so signed and delivered. Borrower agrees to comply with any
written request by Lender within ten (10) days after receipt by Borrower of such
request.
9.20 Intentionally Deleted Prior to Execution
9.21 Waiver of Jury Trial: BORROWER AND LENDER EACH HEREBY WAIVE ANY
AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION,
PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING
OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO
ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE,
FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE
LOAN DOCUMENTS.
9.22 Consequential Damages: Neither Lender nor agent or attorney of
Lender, shall be liable for any consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or
collection of the Obligations.
34
WITNESS the due execution of this Agreement as a document under seal as
of the date first written above.
AMERICAN TECHNICAL CERAMICS CORP.
By: /S/XXXXXX X. XXXX
-----------------
Xxxxxx Xxxx
Vice-President - Controller
COMMERCE BANK, N.A.
By: /S/XXXXXXX XXX
--------------
Name: Xxxxxxx Xxx
Title: Vice President
35