EXHIBIT 10.39
LOAN AGREEMENT
By and Between
CECO FILTERS, INC.
and
CORESTATES BANK, N.A.
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Dated: September 25, 1997
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LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made effective the 25th day of
September, 1997, by and between CECO FILTERS, INC. ("Borrower") and CORESTATES
BANK, N.A. ("Bank").
BACKGROUND
A. Borrower has requested that Bank extend certain credit facilities to
Borrower, which Bank is willing to do on the terms set forth herein.
B. Capitalized terms not otherwise defined herein will have the
meanings set forth therefor in Section 12 of this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any extensions of credit now or hereafter made to or for the
benefit of Borrower by Bank, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. THE LINE; TERM LOAN; USE OF PROCEEDS.
1.1. Line of Credit. Bank will establish for Borrower subject to the
terms and conditions hereof, a revolving demand line of credit (the "Line")
pursuant to which Bank will from time to time make loans or other extensions of
credit to Borrower in an aggregate amount not exceeding at any time the lesser
of: (a) the sum of (i) an amount up to eighty percent (80%) of the Eligible
Receivables, plus (ii) the Permitted Out-of-Formula Advance; or (b) One Million
Five Hundred Thousand Dollars ($1,500,000.00). Within the limitations set forth
above, Borrower may borrow, repay and reborrow under the Line. The Line shall be
subject to all terms and conditions set forth in all of the Loan Documents (as
hereafter defined) which terms and conditions are incorporated herein.
Borrower's obligation to repay the loans and extensions of credit under the Line
shall be evidenced by Borrower's demand promissory note (the "Line Note") in the
face amount of One Million Five Hundred Thousand Dollars ($1,500,000.00), which
shall be in the form attached hereto as Exhibit "A", with the blanks
appropriately filled in. The Line Note shall amend and replace, but not repay or
satisfy, Borrower's obligations to Bank under a certain Master Demand Note dated
July 23, 1997.
1.2. Term Loan. Bank will lend to Borrower and Borrower will borrow
from Bank One Million Dollars ($1,000,000.00) (the "Term Loan"). Borrower's
obligation to repay the Term Loan Shall be evidenced by Borrower's promissory
note in the original principal amount of One Million dollars ($1,000,000.00)
(the "Term Note"), substantially in the form attached hereto as Exhibit "B" with
the blanks appropriately filled in.
1.3. Use of Proceeds. Borrower agrees to use (a) advances under the
Line for proper working capital purposes and to finance the acquisition of
certain assets of Xxxxx Environmental Corporation; and (b) the proceeds of the
Term Loan to finance the acquisition of certain assets of Xxxxx Environmental
Corporation.
1.4. Method of Advances. On any Business Day, Borrower may request an
advance under the Line by making such request to the bank officer designated by
Bank no later than noon Philadelphia time on the Business Day such advance is
requested to be funded, and delivery to Bank of any documentation as Bank may
from time to time require. Subject to the terms and conditions of this
Agreement, Bank may make the proceeds of an advance available to Borrower by
crediting such proceeds to Borrower's deposit account with Bank. Such request
may be by telephone, unless Bank has advised Borrower that written requests are
required. Bank may require prompt written confirmation of any telephone request
and additional back-up documentation, from time to time. Each request for an
advance under the Line shall be conclusively presumed to be made by a person
authorized by Borrower to do so.
1.5. Letters of Credit. Bank, at its sole discretion, may issue for the
account of Borrower merchandise and standby letters of credit in form and
content satisfactory to Bank, at its sole discretion, with a term not to exceed
the earlier to occur of (a) ninety (90) days (for merchandise letters of
credit), or (b) twelve (12) months (for standby letters of credit).
Notwithstanding the foregoing, (i) at no time shall the aggregate face amount of
all outstanding letters of credit issued under the Line exceed the amount of
Five Hundred Thousand Dollars ($500,000.00); and (ii) at no time shall the
principal balance of the Line, plus the aggregate face amount of all outstanding
letters of credit issued under the Line exceed the amount of the loans and
extensions of credit then available to Borrower under the Line pursuant to
advances as described under Section 1.1.
Borrower will execute a letter of credit application and letter of
credit agreement, and such other documents as may be required by Bank in
connection with the issuance of letters of credit hereunder. The outstanding
face amount of all letters of credit issued by Bank pursuant hereto will reduce
Borrower's ability to borrow under the Line as if such face amount were an
advance under the Line. In the event that Bank pays any sums due pursuant to
such letters of credit for any reason, such payment shall be deemed to be an
advance under the Line repayable by Borrower pursuant to the terms hereof.
In the event that the Line is terminated for any reason or demand is
made thereunder, Borrower will deposit with Bank an amount equal to the face
amount of all letters of credit then outstanding which have been issued
hereunder, plus all fees related thereto or to accrue thereunder. Such funds
will be held by Bank as cash collateral to secure Borrower's obligations
hereunder.
1.6. Collection of Receivables; Proceeds of Collateral.
(a) Lockbox. Borrower and New Xxxxx Co., Inc. will collect their
accounts receivable only in the ordinary course of business. Borrower and New
Xxxxx Co., Inc. will notify all of their account debtors to forward all accounts
receivable collections owed to Borrower and New Xxxxx Co., Inc. to a lockbox
maintained by Bank, and will execute such lockbox agreements as may be required
by Bank and will pay to Bank all customary fees in connection with such lockbox
arrangement. Immediately upon receipt, Borrower will forward to Bank all other
checks, drafts and other monies received by Borrower or New Xxxxx Co., Inc.
which are proceeds of the Collateral to the lockbox maintained by Bank.
(b) Operating Account. All accounts receivable collections of
Borrower and New Xxxxx Co., Inc. and all checks, drafts and other monies
received by Borrower and New Xxxxx Co., Inc. which are proceeds of the
Collateral will be deposited in Borrower's and New Xxxxx Co., Inc.'s operating
account maintained at Bank (collectively, the "Operating Account").
(c) Collected Funds. The Operating Account will be cleared by Bank
daily on mutually agreed upon days as to collected funds, and such collected
funds will be applied to the principal balance of and accrued interest on the
Line, at the Bank's election. Upon the occurrence of an Event of Default, Bank
may apply such collected funds to the Bank Indebtedness in such order as it may
elect.
(d) Proceeds of Collateral. Borrower and New Xxxxx Co., Inc. agree
that all monies, checks, notes, instruments, drafts or other payments relating
to or constituting proceeds of any accounts receivable or other Collateral of
Borrower and New Xxxxx Co., Inc. which come into the possession or under the
control of Borrower and/or New Xxxxx Co., Inc. or any employees, agents or other
persons acting for or in concert with Borrower and/or New Xxxxx Co., Inc., shall
be received and held in trust for Bank and such items shall be the sole and
exclusive property of Bank. Immediately upon receipt thereof, Borrower, New
Xxxxx Co., Inc. and such other persons shall remit the same or cause the same to
be remitted, in kind, to Bank. Borrower and New Xxxxx Co., Inc. shall deliver or
cause to be delivered to Bank, with appropriate endorsement and assignment to
Bank with full recourse to Borrower and New Xxxxx Co., Inc., all instruments,
notes and chattel paper constituting an account receivable or proceeds thereof
or other Collateral. Bank is hereby authorized to open all mail addressed to
Borrower and New Xxxxx Co., Inc. and endorse all checks, drafts or other items
for payment on behalf of Borrower and New Xxxxx Co., Inc. Bank is granted a
power of attorney by Borrower and New Xxxxx Co., Inc. with full power of
substitution to execute on behalf of Borrower and New Xxxxx Co., Inc. and in
their names or to endorse their names on any check, draft, instrument, note or
other item of payment or to take any other action or sign any document in order
to effectuate the foregoing. Such power of attorney being coupled with an
interest is irrevocable.
2. INTEREST RATE.
2.1. Interest on the Line. Interest on the unpaid principal balance of
the Line will accrue from the date of advance until final payment thereof at a
per annum rate which is one-half of one percent (1/2 of 1%) in excess of the
Prime Rate in effect from time to time (such interest rate to change immediately
upon any change in the Prime Rate).
2.2. Interest on Term Loan. Interest on the unpaid principal balance of
the Term Loan will accrue until final payment thereof at the rate per annum
which is one-half of one percent (1/2 of 1%) in excess of the Prime Rate in
effect from time to time (such interest rate to change immediately upon any
change in the Prime Rate).
2.3. Default Interest. Interest will accrue on the principal balance of
the Line and the Term Loan after demand or the occurrence of an Event of Default
at a rate which is three percent (3%) in excess of the Prime Rate in effect from
time to time (the "Default Rate").
2.4. Post Judgment Interest. Any judgment obtained for sums due
hereunder or
under the Loan Documents will accrue interest at the applicable default rate set
forth above until paid.
2.5. Calculation. Interest will be computed on the basis of a year of
360 days and paid for the actual number of days elapsed.
2.6. Limitation of Interest to Maximum Lawful Rate. In no event will
the rate of interest payable hereunder exceed the maximum rate of interest
permitted to be charged by applicable law (including the choice of law rules)
and any interest paid in excess of the permitted rate will be refunded to
Borrower. Such refund will be made by application of the excessive amount of
interest paid against any sums outstanding hereunder and will be applied in such
order as Bank may determine. If the excessive amount of interest paid exceeds
the sums outstanding, the portion exceeding the sums outstanding will be
refunded in cash by Bank. Any such crediting or refunding will not cure or waive
any default by Borrower. Borrower agrees, however, that in determining whether
or not any interest payable hereunder exceeds the highest rate permitted by law,
any non-principal payment, including without limitation prepayment fees and late
charges, will be deemed to the extent permitted by law to be an expense, fee,
premium or penalty rather than interest.
3. PAYMENTS AND FEES.
3.1. Interest Payments on the Line. Borrower will pay interest on the
principal balance of the Line on the first day of each calendar month commencing
on the first day of the first calendar month following the date of this
Agreement.
3.2. Principal Payments on the Line. Borrower will pay the outstanding
principal balance of the Line, together with any accrued and unpaid interest
thereon, and any other sums due pursuant to the terms hereof, ON DEMAND. If any
Out-Of-Formula Advance arises or exists under the Line (other than a Permitted
Out-of-Formula Advance) for any reason whatsoever, Borrower will repay such
Out-Of-Formula Advance immediately, without demand. THE INCLUSION OF EVENTS OF
DEFAULT AND COVENANTS IN THE LOAN DOCUMENTS SHALL NOT IN ANY WAY LIMIT THE
DEMAND NATURE OF THE LINE. BORROWER UNDERSTANDS THAT THE BANK MAY MAKE DEMAND
FOR PAYMENT AT ANY TIME FOR ANY OR NO REASON, WITHOUT REGARD TO WHETHER AN EVENT
OF DEFAULT HAS OCCURRED.
3.3. Principal and Interest Payments on the Term Loan. Borrower will
pay the principal of the Term Loan and accrued interest thereon in forty-seven
(47) equal and consecutive monthly installments of Twenty Thousand Eight Hundred
Thirty-Three Dollars and Thirty-Three Cents ($20,833.33) each, plus interest, on
the first day of each calendar month commencing on October 1, 1997 and in one
final payment of the remaining principal balance plus all accrued and unpaid
interest thereon on September 1, 2001. Notwithstanding the foregoing payment
schedule, the proceeds of any stock or equity offering initiated by Borrower
during the term of the Term Loan shall be applied against the principal balance
of the Term Loan and any then outstanding Permitted Out-of-Formula Advances,
together with any accrued interest due thereon, in inverse order of maturity.
3.4. Letter of Credit Fees. Borrower shall pay all fees and charges in
connection with the issuance, renewal, negotiation and cancellation of each
merchandise and standby letter of credit as may be customarily charged by Bank.
Such fees shall be computed on the basis of a year of 360 days.
3.5. Late Charge. In the event that Borrower fails to pay any
principal, interest or other fees or expenses payable hereunder for a period of
at least fifteen (15) days, in addition to paying such sums, Borrower will pay
to Bank a late charge equal to five percent (5%), of such past due payment as
compensation for the expenses incident to such past due payment.
3.6. Prepayment of Term Loan. Borrower may prepay all or any part of
the principal balance of the Term Loan at any time, without penalty or premium.
All prepayments will be applied to the regularly scheduled payments in the
inverse order in which they are due.
3.7. Payment Method. Borrower irrevocably authorizes Bank to debit all
payments required to be made by Borrower hereunder, under the Line and the Term
Loan, on the date due, from any deposit account maintained by Borrower with
Bank. Otherwise, Borrower will be obligated to make such payments directly to
Bank. All payments are to be made in immediately available funds. If Bank
accepts payment in any other form, such payment shall not be deemed to have been
made until the funds comprising such payment have actually been received by or
made available to Bank.
3.8. Application of Payments. Any and all payments on account of the
Line and the Term Loan will be applied to accrued and unpaid interest,
outstanding principal and other sums due hereunder or under the Loan Documents,
in such order as Bank, in its discretion, elects. If Borrower makes a payment or
payments and such payment or payments, or any part thereof, are subsequently
invalidated, declared to be fraudulent or preferential, set aside or are
required to be repaid to a trustee, receiver, or any other person under any
bankruptcy act, state or federal law, common law or equitable cause, then to the
extent of such payment or payments, the obligations or part thereof hereunder
intended to be satisfied shall be revived and continued in full force and effect
as if said payment or payments had not been made.
3.9. Loan Account. Bank will open and maintain on its books a loan
account (the "Loan Account") with respect to advances made, repayments,
prepayments, the computation and payment of interest and fees and the
computation and final payment of all other amounts due and sums paid to Bank
under this Agreement. Except in the case of manifest error in computation, the
Loan Account will be conclusive and binding on the Borrower as to the amount at
any time due to Bank from Borrower under this Agreement or the Notes.
4. SECURITY.
4.1. Collateral. Borrower's obligations hereunder and under the Loan
Documents shall be secured by (a) a certain security agreement of even date
herewith pursuant to which Borrower, New Xxxxx Co., Inc. and Air Purator Corp.
shall grant to Bank a security interest in and lien upon all of Borrower's
present and future accounts, contract rights, chattel papers, instruments,
documents, inventory, general intangibles, machinery, equipment, furniture,
fixtures, books and records and all other tangible and intangible property of
Borrower, New Xxxxx Co., Inc. and Air Purator Corp. and the products and
proceeds thereof (the "Security Agreement"), and (b) a certain open-end mortgage
and security agreement encumbering real property owned by Borrower located at
0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxx Xxxxxx, Pennsylvania, subject
only to prior liens in favor of the Bank and the Pennsylvania Industrial
Development Authority.
4.2. Surety. As further security for the obligations of Borrower
hereunder and under the Loan Documents, Borrower shall cause each Guarantor to
execute and deliver to Bank an unlimited and unconditional surety agreement in
form and content acceptable to Bank (collectively, the "Surety Agreements").
5. CONDITIONS OF CLOSING. The obligations of Bank to make available the
Line and the Term Loan are subject to the performance by Borrower of all of its
agreements to be performed hereunder and to the following further conditions
(any of which may be waived by Bank):
5.1. Loan Documents. Borrower, Guarantors and all other required
persons and entities will have executed and delivered to Bank the Loan
Documents.
5.2. Representations and Warranties. All representations and warranties
of Borrower set forth in the Loan Documents will be true at and as of the date
hereof.
5.3. No Default. No condition or event shall exist or have occurred
which would constitute an Event of Default hereunder (or would, upon the giving
of notice or the passage of time or both, constitute such an Event of Default).
5.4. Proceedings and Documents. All proceedings taken by Borrower in
connection with the transactions contemplated by this Agreement and all
documents incident to such transactions shall be satisfactory in form and
substance to Bank and Bank's counsel, and Bank shall have received all documents
or other evidence which it reasonably may request in connection with such
proceedings and transactions. Borrower and each Guarantor shall have each
delivered to Bank a certificate, in form and substance satisfactory to Bank,
dated the date hereof and signed on behalf of the Borrower or the applicable
Guarantor, as the case may be, by an officer of Borrower or the applicable
Guarantor, as the case may be, certifying (a) true copies of the Articles of
Incorporation and bylaws of the Borrower or the applicable Guarantor in effect
on such date, (b) true copies of all corporate actions taken by Borrower or the
applicable Guarantor relative to the Loan Documents, and (c) the names, true
signatures and incumbency of the officers of the Borrower or the applicable
Guarantor authorized to execute and deliver this Agreement and the other Loan
Documents. Bank may conclusively rely on such certificate unless and until a
later certificate revising the prior certificate has been received by Bank.
5.5. Landlord's or Warehouseman's Release and Waiver Agreements. Bank
shall have received a landlord's or warehouseman's release and waiver agreement,
satisfactory in form and substance to Bank, from each landlord and warehouseman
for each location leased by Borrower or at which Borrower warehouses inventory.
5.6. Delivery of Other Documents. The following documents shall have
been delivered by or on behalf of Borrower and/or Guarantors to Bank:
(a) Good Standing and Tax Lien Certificates. Good Standing
Certificates issued by the State of incorporation of Borrower and of each
Guarantor certifying to the good standing and corporate status of Borrower, good
standing/foreign qualification certificates from all other jurisdictions in
which Borrower and Guarantors are required to be qualified to do business, and
tax lien certificates for Borrower and each Guarantor from each jurisdiction in
which Borrower and that Guarantor are required to be qualified to do business.
(b) Authorization Documents. Evidence of authorization of
Borrower's and Guarantors' execution and full performance of this Agreement, the
Loan Documents and all other documents and actions required hereunder.
(c) Insurance. Evidence of the insurance coverage as required
under the Security Agreement.
(d) Opinion of Counsel. An opinion of counsel for Borrower in form
and content satisfactory to Bank.
(e) Lien Search. Copies of record searches (including UCC searches
and judgments, suits, tax and other lien searches) confirming that Bank has a
first priority security interest in the Collateral, except as otherwise provided
in this Agreement, acceptable to Bank.
(f) No Material Adverse Change. Evidence satisfactory to the Bank
that no material adverse change has occurred with respect to the Borrower since
December 31, 1996.
(g) Subordination Agreement. A subordination agreement in form and
content acceptable to Bank executed by CECO Environmental Corp., together with
evidence satisfactory to Bank of the extension and funding of an unsecured loan
in the amount of Five Hundred Thousand Dollars ($500,000.00) by CECO
Environmental Corp. to Borrower.
(h) Asset Purchase Agreement Copies of the executed Asset Purchase
Agreement dated September 9, 1997 by and between New Xxxxx Co. and Xxxxx Co.,
together with evidence satisfactory to Bank of the consummation of the
transactions contemplated therein.
(i) Other Documents. Such other documents as may be required to be
submitted to Bank by the terms hereof or of any Loan Document.
5.7. Non-Waiver of Rights. By completing the closing hereunder, or by
making advances hereunder, Bank does not thereby waive a breach of any warranty
or representation made by Borrower hereunder or any agreement, document, or
instrument delivered to Bank or otherwise referred to herein, and any claims and
rights of Bank resulting from any breach or misrepresentation by Borrower are
specifically reserved by Bank.
6. CERTAIN CONDITIONS TO SUBSEQUENT ADVANCES. Subsequent advances
shall be conditioned upon the following conditions and each request by Borrower
for an advance shall constitute a representation by Borrower to Bank that each
condition has been met or satisfied:
6.1. Representations and Warranties. All representations and warranties
of Borrower contained in the Loan Documents shall be true at and as of the date
of such advance as if made on such date, and each request for an advance shall
constitute reaffirmation by Borrower that such representations and warranties
are then true.
6.2. No Default. No condition or event shall exist or have occurred at
or as of the date of such advance which would constitute an Event of Default
hereunder (or would, upon the giving of notice or the passage of time or both,
constitute such an Event of Default).
6.3. Other Requirements. Bank shall have received all certificates,
authorizations,
affidavits, schedules and other documents which are provided for hereunder or
under the Loan Documents, or which Bank may reasonably request.
7. DEFAULT AND REMEDIES.
7.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an Event or Events of Default hereunder:
(a) The failure of Borrower to pay any amount of principal or
interest on the Notes or any fee or other sums payable hereunder, or any other
Bank Indebtedness on the date on which such payment is due, whether on demand,
at the stated maturity or due date thereof, or by reason of any requirement for
the prepayment thereof, by acceleration or otherwise;
(b) The failure of Borrower or any Guarantor to duly perform or
observe any obligation, covenant or agreement on its part contained herein or in
any other Loan Document not otherwise specifically constituting an Event of
Default under this Section 7.1 and such failure continues unremedied for a
period of thirty (30) days after the earlier of (i) notice from Bank to Borrower
or Guarantor of the existence of such failure, or (ii) any officer or principal
of Borrower or Guarantor knows or should have known of the existence of such
failure, provided that, in the event such failure is incapable of remedy or
consists of a default of any of the financial covenants in Section 7 of the
Security Agrement, or was wilfully caused or permitted by Borrower or Guarantor,
Borrower and Guarantor shall not be entitled to any notice or grace hereunder;
(c) The failure of Borrower or any Guarantor to pay any
Indebtedness for borrowed money due to any third Person which results in
acceleration or an exercise of remedies thereunder or the existence of any other
event of default under any loan, security agreement, mortgage or other agreement
pertaining thereto binding Borrower, after the expiration of any notice and/or
grace periods permitted in such documents which results in acceleration or an
exercise of remedies thereunder;
(d) The failure of Borrower or any Guarantor to pay or perform any
other obligation to Bank under any other agreement or note or otherwise arising,
whether or not related to this Agreement, after the expiration of any notice
and/or grace periods permitted in such documents;
(e) The adjudication of Borrower or any Guarantor as a bankrupt or
insolvent, or the entry of an Order for Relief against Borrower or any Guarantor
or the entry of an order appointing a receiver or trustee for Borrower or any
Guarantor of any of its property or approving a petition seeking reorganization
or other similar relief under the bankruptcy or other similar laws of the United
States or any state or any other competent jurisdiction;
(f) A proceeding under any bankruptcy, reorganization, arrangement
of debt, insolvency, readjustment of debt or receivership law is filed by or
(unless dismissed within 60 days) against Borrower or any Guarantor or Borrower
or any Guarantor makes an assignment for the benefit of creditors, or Borrower
or any Guarantor takes any action to authorize any of the foregoing;
(g) The suspension of the operation of Borrower's present
business, or
Borrower becoming unable to meet its debts as they mature, or the admission in
writing by Borrower or any Guarantor to such effect, or Borrower or any
Guarantor calling any meeting of all or any material portion of its creditors
for the purpose of debt restructure;
(h) All or any part of the Collateral or any material part of the
assets of Borrower or any Guarantor are attached, seized, subjected to a writ or
distress warrant, or levied upon, or come within the possession or control of
any receiver, trustee, custodian or assignee for the benefit of creditors;
(i) The entry of a final judgment for the payment of money against
Borrower or any Guarantor which, within ten (10) days after such entry, shall
not have been discharged or execution thereof stayed pending appeal or shall not
have been discharged within five (5) days after the expiration of any such stay;
(j) Any representation or warranty of Borrower or any Guarantor in
any of the Loan Documents is discovered to be untrue in any material respect or
any statement, certificate or data furnished by Borrower or that Guarantor
pursuant hereto is discovered to be untrue in any material respect as of the
date as of which the facts therein set forth are stated or certified;
(k) Borrower or any Guarantor voluntarily or involuntarily
dissolves or is dissolved, terminates or is terminated;
(l) Borrower is enjoined, restrained, or in any way prevented by
the order of any court or any administrative or regulatory agency, the effect of
which order restricts Borrower from conducting all or any material part of its
business;
(m) A material and adverse change occurs in any of Borrower's
operations, management or financial condition or in the value of the Collateral;
(n) Any breach by Borrower or any creditor of its obligations
under any subordination agreement now or hereafter executed in favor of Bank
after expiration of any notice or grace periods permitted in such documents; or
(o) The validity or enforceability of this Agreement, or any of
the Loan Documents, is contested by Borrower or any Guarantor; any stockholder
of Borrower or any Guarantor; or Borrower or any Guarantor denies that it has
any or any further liability or obligation hereunder or thereunder.
7.2. Remedies. At the option of the Bank, upon the occurrence of an
Event of Default, or at any time thereafter:
(a) The entire unpaid principal of the Line, all other Bank
Indebtedness, or any part thereof, all interest accrued thereon, all fees due
hereunder and all other obligations of Borrower to Bank hereunder or under any
other agreement, note or otherwise arising will become immediately due and
payable without any further demand or notice;
(b) The Line will immediately terminate and the Borrower will
receive no further extensions of credit thereunder;
(c) Bank may increase the interest rate on the Notes to the
applicable default rate set forth herein, without notice;
(d) Bank may reduce availability for advances under the formula
set forth in Section 1.1 or require additional reserves without notice;
(e) Bank may enter the premises occupied by Borrower and take
possession of the Collateral and any records relating thereto; and/or
(f) Bank may exercise each and every right and remedy granted to
it under the Loan Documents, under the Uniform Commercial Code and under any
other applicable law or at equity.
If an Event of Default occurs under Section 7.1(e) or (f), all Bank
Indebtedness shall become immediately due and payable.
7.3. Set-Off. Without limiting the rights of Bank under applicable law,
Bank has and may exercise a right of set-off, a lien against and a security
interest in all property of Borrower now or at any time in Bank's possession in
any capacity whatsoever, including but not limited to any balance of any
deposit, trust or agency account, or any other bank account with Bank, as
security for all Bank Indebtedness. At any time and from time to time following
the occurrence of an Event of Default, Bank may without notice or demand, set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Bank to or for the credit of Borrower against any or all of the Bank
Indebtedness and the Borrower's obligations under the Loan Documents. If any
bank account of Borrower with Bank is attached or otherwise liened or levied
upon by any third party, Bank need not await the running of any applicable grace
period hereunder, but Bank shall have and be deemed to have the immediate right
of set-off and may apply the funds or amount thus set-off against Borrower's
obligations to the Bank.
7.4. Turnover of Property Held by Bank. Borrower irrevocably authorize
any Affiliate of Bank, upon and following the occurrence of an Event of Default,
at the request of Bank and without further notice, to turnover to Bank any
property of Borrower held by such Affiliate, including without limitation, funds
and securities for the Borrower's account and to debit, for the benefit of Bank,
any deposit account maintained by Borrower with such Affiliate (even if such
deposit account is not then due or there results a loss or reduction of interest
or the imposition of a penalty in accordance with law applicable to the early
withdrawal of time deposits), in the amount requested by Bank up to the amount
of the Bank Indebtedness, and to pay or transfer such amount or property to Bank
for application to the Bank Indebtedness.
7.5. Delay or Omission Not Waiver. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege under the
Loan Documents upon the occurrence of any Event of Default or otherwise shall
operate as a waiver thereof or impair any such right, remedy, power or
privilege. No waiver of any Event of Default shall affect any later Event of
Default or shall impair any rights of Bank. No single, partial or full exercise
of any rights, remedies, powers and privileges by the Bank shall preclude
further or other exercise thereof. No course of dealing between Bank and
Borrower shall operate as or be deemed to constitute a waiver of Bank's rights
under the Loan Documents or affect the duties or obligations of Borrower.
7.6. Remedies Cumulative; Consents. The rights, remedies, powers and
privileges provided for herein shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other rights, remedies, powers and
privileges in Bank's favor at law or in equity.
7.7. Certain Fees, Costs, Expenses, Expenditures and Indemnification.
Borrower agrees to pay on demand all costs and expenses of Bank, including
without limitation:
(a) all costs and expenses in connection with the preparation,
review, negotiation, execution, delivery and administration of the Loan
Documents, and the other documents to be delivered in connection therewith, or
any amendments, extensions and increases to any of the foregoing (including,
without limitation, attorney's fees and expenses, and the cost of appraisals and
reappraisals of Collateral), and the cost of periodic lien searches and tax
clearance certificates, as Bank deems advisable;
(b) all losses, costs and expenses in connection with the
enforcement, protection and preservation of the Bank's rights or remedies under
the Loan Documents, or any other agreement relating to any Bank Indebtedness, or
in connection with legal advice relating to the rights or responsibilities of
Bank (including without limitation court costs, attorney's fees and expenses of
accountants and appraisers); and
(c) any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of the Loan Documents, and
all liabilities to which Bank may become subject as the result of delay in
paying or omission to pay such taxes.
In the event Borrower shall fail to pay taxes, insurance, assessments,
costs or expenses which it is required to pay hereunder, or fails to keep the
Collateral free from security interests or lien (except as expressly permitted
herein), or fails to maintain or repair the Collateral as required hereby, or
otherwise breaches any obligations under the Loan Documents, Bank in its
discretion, may make expenditures for such purposes and the amount so expended
(including attorney's fees and expenses, filing fees and other charges) shall be
payable by Borrower on demand and shall constitute part of the Bank
Indebtedness.
With respect to any amount required to be paid by Borrower under this
Section, in the event Borrower fails to pay such amount on demand, Borrower
shall also pay to Bank interest thereon at the default rate set forth for the
Line.
Borrower agrees to indemnify and hold harmless, Bank and Bank's
officers, directors, shareholders, employees and agents, from and against any
and all claims, liabilities, losses, damages, costs and expenses (whether or not
such Person is a party to any litigation), including attorney's fees and costs
and costs of investigation, document production, attendance at depositions or
other discovery with respect to or arising out of this Agreement, the use of any
proceeds advanced hereunder, the transactions contemplated hereunder, or any
claim, demand, action or cause of action being asserted against Borrower or any
of its Affiliates.
Borrower's obligations under this Section shall survive termination of
this Agreement and repayment of the Bank Indebtedness.
7.8. Time is of the Essence. Time is of the essence in Borrower's
performance of its obligations under the Loan Documents.
7.9. Acknowledgment of Confession of Judgment Provisions. BORROWER
ACKNOWLEDGES AND AGREES THAT THE NOTES AND THE LOAN DOCUMENTS CONTAIN PROVISIONS
WHEREBY BANK MAY ENTER JUDGMENT BY CONFESSION AGAINST BORROWER AFTER DEMAND OR
THE OCCURRENCE OF AN EVENT OF DEFAULT, AS THE CASE MAY BE. BEING FULLY AWARE OF
ITS RIGHTS TO PRIOR NOTICE AND HEARING ON THE QUESTION OF THE VALIDITY OF ANY
CLAIMS THAT MAY BE ASSERTED AGAINST IT BY BANK UNDER THE NOTES AND LOAN
DOCUMENTS, BEFORE JUDGMENT CAN BE ENTERED, BORROWER HEREBY WAIVES THESE RIGHTS
AND AGREES AND CONSENTS TO BANK ENTERING JUDGMENT AGAINST BORROWER BY
CONFESSION. ANY PROVISION IN A CONFESSION OF JUDGMENT IN ANY OF THE LOAN
DOCUMENTS FOR AN ATTORNEY'S COLLECTION COMMISSION SHALL IN NO WAY LIMIT
BORROWER'S LIABILITY TO REIMBURSE BANK FOR ALL LEGAL FEES ACTUALLY INCURRED BY
BANK, EVEN IF SUCH FEES ARE IN EXCESS OF THE ATTORNEY'S COLLECTION COMMISSION
PROVIDED FOR IN SUCH CONFESSION OF JUDGMENT.
8. COMMUNICATIONS AND NOTICES.
8.1. Communications and Notices. All notices, requests and other
communications made or given in connection with the Loan Documents shall be in
writing and, unless receipt is stated herein to be required, shall be deemed to
have been validly given if delivered personally to the individual or division or
department to whose attention notices to a party are to be addressed, or by
private carrier, or registered or certified mail, return receipt requested, or
by telecopy with the original forwarded by first-class mail, in all cases, with
charges prepaid, addressed as follows, until some other address (or individual
or division or department for attention) shall have been designated by notice
given by one party to the other:
To Borrower:
CECO Filters, Inc.
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, President
Telecopy Number: (000) 000-0000
With a copy to:
White and Xxxxxxxx
0000 Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Esquire
Telecopy Number: (000) 000-0000
To Bank:
CoreStates Bank, N.A.
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxx, Vice President
Telecopy Number: (000) 000-0000
With a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxxxx Xxxxxxx
Xxxxxxxx 000
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxx Xxxxxx-Xxxxx, Esquire
Telecopy Number: (000) 000-0000
9. DEFINITIONS. The following words and phrases as used in capitalized
form in this Agreement, whether in the singular or plural, shall have the
meanings indicated:
9.1. "Accounting Terms". As used in this Agreement, or any certificate,
report or other document made or delivered pursuant to this Agreement,
accounting terms not defined elsewhere in this Agreement shall have the
respective meanings given to them under GAAP.
9.2. "Affiliate", as to any Person, means each other Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person in question.
9.3. "Agreement" has the meaning set forth in the opening recital of
this Agreement.
9.4. "Bank" has the meaning set forth in the opening recital of this
Agreement.
9.5. "Bank Indebtedness" shall mean all obligations and Indebtedness of
Borrower to Bank, whether now or hereafter owing or existing, including, without
limitation, all obligations under the Loan Documents, all obligations to
reimburse Bank for payments made by Bank pursuant to any letter of credit issued
for the account or benefit of Borrower by Bank, all other obligations or
undertakings now or hereafter made by or for the benefit of Borrower to or for
the benefit of Bank under any other agreement, promissory note or undertaking
now existing or hereafter entered into by Borrower with Bank, including, without
limitation, all obligations of Borrower to Bank under any guaranty or surety
agreement and all obligations of Borrower to immediately pay to Bank the amount
of any overdraft on any deposit account maintained with Bank, together with all
interest and other sums payable in connection with any of the foregoing.
9.6. "Borrower" has the meaning set forth in the opening recital of
this Agreement.
9.7. "Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Pennsylvania are authorized by law to close.
9.8. "Corporation" means a corporation, partnership, trust,
unincorporated organization, association or joint stock company.
9.9. "Default Rate" has the meaning set forth in Section 2.3.
9.10. "Eligible Receivables" means accounts receivable of Borrower and
New Xxxxx Co. in which Bank has a prior, perfected, first priority lien which
have been due no more than ninety (90) days from the invoice date, are not
subject to offsets, deductions, counterclaims, discounts, credit, charge back,
freight claim, allowance or adjustment comply wit the representations set forth
in the Security Agreement and meet all specifications established by
Bank in its sole discretion from time to time. Eligible Receivables shall not
include: (a) non-trade receivables; (b) foreign accounts receivable unless fully
secured by a letter of credit issued by a financial institution acceptable to
Bank in its discretion; (c) contra-accounts; (d) intercompany accounts or
accounts from other affiliated corporation, organizations or individuals; (e)
accounts receivable from the United States government or any of its agencies
which have not been assigned to Bank under the Assignment of Claims Act; (f)
finance charges; (g) lease receivables; (h) accounts receivable of poor quality;
and (i) accounts receivable concentrated in individual account debtors in such
amounts or percentage as may be unacceptable to Bank. In the event that any
account receivable previously scheduled, listed or referred to in any
certificate, statement or report by Borrower and upon which Borrower is basing
availability under the Line ceases to be an Eligible Receivable, Borrower shall
notify Bank thereof immediately.
9.11. "Event of Default" means each of the events specified in Section
7.1.
9.12. "GAAP" means generally accepted accounting principles in the
United States of America, in effect from time to time, consistently applied and
maintained.
9.13. "Guarantor" means CECO Environmental Corp., a New York
corporation, and New Xxxxx Co., Inc., a Delaware corporation.
9.14. "Indebtedness", as applied to a Person, means:
(a) all items (except items of capital stock or of surplus) which
in accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as at the date as
of which Indebtedness is to be determined;
(b) to the extent not included in the foregoing, all indebtedness,
obligations, and liabilities secured by any mortgage, pledge, lien, conditional
sale or other title retention agreement or other security interest to which any
property or asset owned or held by such Person is subject, whether or not the
indebtedness, obligations or liabilities secured thereby shall have been assumed
by such Person; and
(c) to the extent not included in the foregoing, all indebtedness,
obligations and liabilities of others which such Person has directly or
indirectly guaranteed, endorsed (other than for collection or deposit in the
ordinary course of business), sold with recourse, or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire or in respect of which
such Person has agreed to supply or advance funds (whether by way of loan, stock
purchase, capital contribution or otherwise) or otherwise to become directly or
indirectly liable.
9.15. "Line" has the meaning set forth in Section 1.1.
9.16. "Line Note" has the meaning set forth in Section 1.1.
9.17. "Loan Documents" means this Agreement, the Line Note, the Term
Note, the Security Agreement, the Surety Agreements and all other documents,
executed or delivered by Borrower and/or the Guarantor pursuant to this
Agreement, as they may be amended from time to time.
9.18. "Notes" means the Line Note and the Term Note and "Note" means
either the Line Note or the Term Note.
9.19. "Out-Of-Formula Advance" means the amount by which the then
outstanding principal balance of the Line exceeds the amount that Bank may
advance pursuant to the formula advance provisions of Section 1.1 subject to
such other restrictions on advances as are otherwise set forth in this
Agreement.
9.20. "Permitted Out-of-Formula Advance" means Out-of-Formula Advances
in a principal amount not to exceed at any time Six Hundred Thousand Dollars
($600,000.00), in the aggregate, which amount shall be decreased as of December
31, 1997 and again as of June 30, 1998 based upon the results of Borrower's
operations.
9.21. "Person" means an individual, a Corporation or a government or
any agency or subdivision thereof, or any other entity.
9.22. "Prime Rate" means the annual interest rate established from time
to time by Bank and generally known by Bank as its "prime rate", whether
published by it publicly or only for the internal guidance of its loan officers.
The Prime Rate is used merely as a pricing index and is not and should not be
considered to represent the lowest or best rate available to a borrower.
9.23. "Subsidiary" means a Corporation (a) which is organized under the
laws of the United States or any State thereof, or any other county or
jurisdiction of Canada or Puerto Rico, (b) which conducts substantially all of
its business and has substantially all of its assets within the United States,
Canada or Puerto Rico, and (c) of which more than fifty percent (50%) of its
outstanding voting stock of every class (or other voting equity interest) is
owned by Borrower or one or more of its Subsidiaries.
9.24. "Security Agreement" has the meaning set forth in Section 4.1.
9.25. "Surety" has the meaning set forth in Section 4.2.
9.26. "Term Note" has the meaning set forth in Section 1.2.
10. WAIVERS.
10.1. Waivers. In connection with any proceedings under the Loan
Documents, including without limitation any action by Bank in replevin,
foreclosure or other court process or in connection with any other action
related to the Loan Documents or the transactions contemplated hereunder,
Borrower waives:
(a) all errors, defects and imperfections in such proceedings;
(b) all benefits under any present or future laws exempting any
property, real or personal, or any part of any proceeds thereof from attachment,
levy or sale under execution, or providing for any stay of execution to be
issued on any judgment recovered under any of the Loan Documents or in any
replevin or foreclosure proceeding, or otherwise providing for any valuation,
appraisal or exemption;
(c) all rights to inquisition on any real estate, which real
estate may be
levied upon pursuant to a judgment obtained under any of the Loan Documents and
sold upon any writ of execution issued thereon in whole or in part, in any order
desired by Bank;
(d) presentment for payment, demand, notice of demand, notice of
non-payment, protest and notice of protest of any of the Loan Documents,
including the Notes;
(e) any requirement for bonds, security or sureties required by
statute, court rule or otherwise;
(f) any demand for possession of Collateral prior to commencement
of any suit; and
(g) all rights to claim or recover attorney's fees and costs in
the event that Borrower is successful in any action to remove, suspend or
enforce a judgment entered by confession.
10.2. Forbearance. Bank may release, compromise, forbear with respect
to, waive, suspend, extend or renew any of the terms of the Loan Documents,
without notice to Borrower.
10.3. Limitation on Liability. Borrower shall be responsible for and
Bank is hereby released from any claim or liability in connection with:
(a) Safekeeping any Collateral;
(b) Any loss or damage to any Collateral;
(c) Any diminution in value of the Collateral; or
(d) Any act or default of another Person.
Bank shall only be liable for any act or omission on its part
constituting gross negligence or wilful misconduct. In the event that Bank
breaches its required standard of conduct, Borrower agrees that its liability
shall be only for direct damages suffered and shall not extend to consequential
or incidental damages. In the event Borrower brings suit against Bank in
connection with the transactions contemplated hereunder and Bank is found not to
be liable, Borrower will indemnify and hold Bank harmless from all costs and
expenses, including attorney's fees, incurred by Bank in connection with such
suit. This Agreement is not intended to obligate Bank to take any action with
respect to the Collateral or to incur expenses or perform any obligation or duty
of Borrower.
11. SUBMISSION TO JURISDICTION.
11.1. Submission to Jurisdiction. Borrower hereby consents to the
exclusive jurisdiction of any state or federal court located within the
Commonwealth of Pennsylvania, and irrevocably agrees that, subject to the Bank's
election, all actions or proceedings relating to the Loan Documents or the
transactions contemplated hereunder shall be litigated in such courts, and
Borrower waives any objection which it may have based on lack of personal
jurisdiction, improper venue or forum non conveniens to the conduct of any
proceeding in any such court and waives personal service of any and all process
upon it, and consents that all such service of
process be made by mail or messenger directed to it at the address set forth in
Section 8.1. Nothing contained in this Section shall affect the right of Bank to
serve legal process in any other manner permitted by law or affect the right of
Bank to bring any action or proceeding against Borrower or its property in the
courts of any other jurisdiction.
12. MISCELLANEOUS.
12.1. Brokers. The transaction contemplated hereunder was brought about
and entered into by Bank and Borrower acting as principals and without any
brokers, agents or finders being the effective procuring cause hereof. Borrower
represents to Bank that Borrower has not committed Bank to the payment of any
brokerage fee or commission in connection with this transaction. If any such
claim is made against Bank by any broker, finder or agent or any other Person,
Borrower agrees to indemnify, defend and hold Bank harmless against any such
claim, at Borrower's own cost and expense, including Bank's attorneys' fees.
Borrower further agrees that until any such claim or demand is adjudicated in
Bank's favor, the amount claimed and/or demanded shall be deemed part of the
Bank Indebtedness secured by the Collateral.
12.2. Use of Bank's Name. Borrower shall not use Bank's name or the
name of any of Bank's Affiliates in connection with any of its business or
activities except as may otherwise be required by the rules and regulations of
the Securities and Exchange Commission or any like regulatory body and except as
may be required in its dealings with any governmental agency.
12.3. No Joint Venture. Nothing contained herein is intended to permit
or authorize Borrower to make any contract on behalf of Bank, nor shall this
Agreement be construed as creating a partnership, joint venture or making Bank
an investor in Borrower.
12.4. Survival. All covenants, agreements, representations and
warranties made by Borrower in the Loan Documents or made by or on its behalf in
connection with the transactions contemplated here shall be true at all times
this Agreement is in effect and shall survive the execution and delivery of the
Loan Documents, any investigation at any time made by Bank or on its behalf and
the making by Bank of the loans or advances to Borrower. All statements
contained in any certificate, statement or other document delivered by or on
behalf of Borrower pursuant hereto or in connection with the transactions
contemplated hereunder shall be deemed representations and warranties by
Borrower.
12.5. No Assignment by Borrower. Borrower may not assign any of its
rights hereunder without the prior written consent of Bank, and Bank shall not
be required to lend hereunder except to Borrower as it presently exists.
12.6. Assignment or Sale by Bank. Bank may sell, assign or participate
all or a portion of its interest in the Loan Documents and in connection
therewith may make available to any prospective purchaser, assignee or
participant any information relative to Borrower in its possession.
12.7. Binding Effect. This Agreement and all rights and powers granted
hereby will bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
12.8. Severability. The provisions of this Agreement and all other Loan
Documents are deemed to be 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.
12.9. No Third Party Beneficiaries. The rights and benefits of this
Agreement and the Loan Documents shall not inure to the benefit of any third
party.
12.10. Modifications. No modification of this Agreement or any of the
Loan Documents shall be binding or enforceable unless in writing and signed by
or on behalf of the party against whom enforcement is sought.
12.11. Holidays. If the day provided herein for the payment of any
amount or the taking of any action falls on a Saturday, Sunday or public holiday
at the place for payment or action, then the due date for such payment or action
will be the next succeeding Business Day.
12.12. Law Governing. This Agreement has been made, executed and
delivered in the Commonwealth of Pennsylvania and will be construed in
accordance with and governed by the laws of such Commonwealth.
12.13. Integration. The Loan Documents shall be construed as integrated
and complementary of each other, and as augmenting and not restricting Bank's
rights, powers, remedies and security. The Loan Documents contain the entire
understanding of the parties thereto with respect to the matters contained
therein and supersede all prior agreements and understandings between the
parties with respect to the subject matter thereof and do not require parol or
extrinsic evidence in order to reflect the intent of the parties.
12.14. Exhibits and Schedules. All exhibits and schedules attached
hereto are hereby made a part of this Agreement.
12.15. Headings. The headings of the Articles, Sections, paragraphs and
clauses of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.
12.16. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.17. Waiver of Right to Trial by Jury. BORROWER AND BANK WAIVE ANY
RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a)
ARISING UNDER ANY OF THE LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER OR BANK WITH RESPECT TO ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. BORROWER AND BANK AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF BORROWER AND BANK TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL REGARDING THIS SECTION, THAT IT FULLY UNDERSTANDS ITS TERMS,
CONTENT AND EFFECT, AND THAT IT VOLUNTARILY AND KNOWINGLY AGREES TO THE TERMS OF
THIS SECTION.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CECO FILTERS, INC.
By:/s/ Xxxxxx X. Xxxx
----------------------------------
Xxxxxx X. Xxxx, President
CORESTATES BANK, N.A.
By:/s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx, Vice President
